What’s Beyond The House Price? Accounting For Closing Costs, Taxes, And Mortgages
Are you thinking about buying a house? It is a major investment and more importantly, a dream everyone wants to achieve one day. But did you know buying a house is not that simple as there are several things that you need to do and understand?
Popular American author Suze Orman once said, “Owning a home is a keystone of wealth, both financial affluence and emotional security.” This is true because a self-owned home gives you stability in life.
In this article, I’ll tell you about what’s beyond the house price, accounting for closing costs, taxes, and mortgages. So, if you have decided to buy yourself a good property, read this first before going any further.
Navigating Additional Homeownership Costs: A Guide
If you are thinking that you’ll either take a home loan or use your lifelong savings and buy a house and that’s all you have to do, then you are wrong. There are additional costs that you need to be aware of.
Understanding Down Payments
A real estate agent or builder would take a certain percentage of the total amount that you have to pay for the house, and this is known as a down payment. And a down payment on a home cant be avoided, after paying it rest can be financed with the help of a home loan.
Now, you can pay a large amount which would reduce your loan amount, or pay enough that won’t harm you financially, and your loan would cover the rest. But again, you’ll be paying interest for a certain duration until your loan is cleared.
The real estate market also fluctuates from time to time if you take the things that are given in the infographic into consideration you might be able to get a great deal for yourself.
Mortgages: Decoding The Financial Commitment
In simple terms, mortgages are loans where the borrower makes a promise to the lender that they’ll pay the amount taken throughout a period, along with interest. Here, the home itself is taken as collateral, so if the borrower fails to pay the money their house will be taken.
Yes, it doesn’t sound safe, but this is why it’s a commitment that you can let go until you are done with all the dues. It is also beneficial because it doesn’t put you under financial stress, which will come by paying the whole amount at once.
There are different types of mortgages like fixed, adjustable rate, balloon mortgages, and more. You can talk to an advisor and see which one you should take. You can also take a PMI (Private Mortgage Loan) and pay it off monthly.
Closing Costs: Beyond The Down Payment
Look, everything that you do whether taking a loan, paying the realtor, or making any transaction is going to cost you additional money. For example, your loan lender will charge you for processing the loan.
Even when you are all done with the mortgage, there would be one more cost, which is called closing costs. Closing costs are paid at the time you are closing your mortgages. Usually, it costs you around 3%-6% of the total loan amount taken. And your closing costs don’t include your down payment.
Property Taxes: An Ongoing Financial Commitment
So, you’ve paid off your mortgages? You are all set? No. As long as you are owning a property, you’ll have to pay taxes on it. This is either paid annually or half-yearly. It depends on your country’s law.
But what will happen if you don’t do so? Well, the due amount will get pilled up, and eventually will sell off your home to get the amount. They don’t want to make any profit here, they only want the amount you own them. So they can sell it at a very low price.
Additional Hidden Costs: Preparing For The Unexpected
So far, I told you upfront costs that can’t be avoided, but there are several hidden costs that you might know about. For instance, if you hire a broker they will cost you money, it can be as high as 5-6% of the total amount you’ll pay for the house.
Your house would require maintenance from time to time and depending on the area you are living in, HOA (Homeowners Association) will ask for monthly fees so that the neighborhood is maintained.
There could be more, this is why you should always be prepared and have some money aside for such things.
EndNote
By now you must’ve realized that buying a house is not that simple and this is the reason why many people could never do that. If you are thinking about making such a purchase, you should consult a professional and take proper insights.
Even if you are taking a loan, you need to have a proper plan on how you are going to pay it off. Savings are also necessary as they’ll help you in emergencies. Be careful and work smartly!
