Advice from Dave Ramsey(2 of 3): 5 Hidden Costs of Homeownership
Dave Ramsey is one of the most popular financial advisors in America having helped millions of people who were in financial distress. After many years of experience with homeowners, Dave exposes the costs of homeownership that many people do not realize prior to purchasing a home. Whether you are about to purchase or are already living in your home but struggling with payments and upkeep, these five points are crucial to determine your next steps of purchasing or selling your home.
1. Repair fees
A homeowner is ultimately in charge of any and all maintenance costs. Obviously, these costs are variable depending on the home but I will say most people underestimate all the problems that could and probably will engender upon regular use of the home. The rule of thumb is, maintenance costs are typically 1% of the home’s value but for most of us this is a minimum as something may go wrong with the furnace, kitchen, bathroom(s), siding, roofing, lighting, driveway paving, chimney, septic, windows, carpets and much more. This addition to your monthly expenses on top of your mortgage payments must be considered as a homeowner.
2. Lawn care
Your beautiful lawn cannot stay beautiful without your contribution. You either must buy a lawnmower or outsource this job to someone who will cut your grass. Need landscaping work done? It will be another considerable addition to your maintenance cost.
If you have not read my article on over-paying your property taxes, please read it at your earliest convenience. Property tax is tax based on the appraisal value of your home and the tax rates of the taxing jurisdictions in which the property is located. The amount of how much you pay could be staggering but it is easily overlooked as it comes only once a year. Dave highly recommends that you factor in these yearly costs when in the market for a new home – “make sure the payment (including taxes) is no more than 25% of your take-home pay.”
Anyone who has owned a home understands the time required to keep up the home. The majority of your weekends are spent repairing, maintaining your backyard, cleaning and etc. Even if you are not necessarily struggling to pay off your mortgage(s), the opportunity cost merely in terms of time can make renting or downgrading to a smaller home more desirable.
5. New Stuff
The temptations of making your residence more aesthetically pleasing exponentially increases when you own a home. For existing homeowners, remember when you first moved in? All of a sudden, your old furniture didn’t fit too well in your new home and buying new furniture to make your home look more like “you” suddenly became a requirement. Several thousands of dollars are easily spent upgrading your furniture even if you were unable to afford it. Dave is not prohibiting homeowners from buying new furniture. Rather, he recommends taking it slow by saving every month and paying for it when you have cash.
These points are just a fraction of the expenses that come with owning a home. Contrary to what many believe, homeownership is not the same as renting as the differences in cost and time are substantial but often overlooked. For those who are looking to purchase a home, Dave recommends proactively preparing a budget with 3 to 6 months of household expenses saved, and actually sticking to the budget.
If you are currently a homeowner and feel it would be a better option to rent or downsize in this season of life, please make an inquiry under the short sale tab above for free consultation or feel free to email me at Peter@seattleshortsaleblog.com
Hope this helps