Apart from having certain benefits of owning a home there are also financial hurdles in the path of homeowners. Not only down payments, but certain other expenses are also associated with owning a home. Here are the 4 tips to handle your financial burdens efficiently.
- Prepare a new budget
Your current mortgage payment might differ with your previous rental amount and managing the difference can be a headache for a new homeowner. For the first few months, track your expenses and jot down where you need to reduce further to balance the difference between the two.
- Prepare for unexpected wear and tear
It is advisable to keep aside an emergency fund for meeting normal repair and maintenance. Sometimes, due to heavy rains, storms, hurricanes, tornadoes your fund might come to zero because these natural disasters comes with an irreparable damages.
Most of us spend 1% to 4% of our house value in regular maintenance work. For example, your home’s current market value is $3000, so you can expect to spend $3000 a year.
Try first to replace faulty appliances, heaters, etc then jump onto small expenses.
- Your property taxes might go up
Being a homeowner, apart from having responsibilities towards your home, you also have some responsibilities towards the State also. It includes paying your property taxes on time. You cannot expect a certain percentage to remain fixed for the long time, however, state policies can be changed anytime such as an increasing percentage of the property tax. For example, in 2000,the US government collected an estimated amount of $ 247 billion on the account of property tax, but by 2010, the figure goes double to $476 billion. So, keep yourself prepared for these significant law changes.
- Escrow system for larger payments
If you’re a homeowner then you might be responsible for three major fixed expenses, such as, homeowners insurance, property taxes, and mortgage payments. To be on the safe side, many people plan to roll their taxes and insurance into their mortgage expenses via an escrow system. In this system, a lender charges a set amount per month, which is obviously above your mortgage payment. The excess money will be kept aside in an escrow account and will use to pay homeowners insurance and property taxes when due. But not all lenders do that and homeowners remain responsible for their exact mortgage payment and need to further plan about insurance and taxes.