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• Dale A

# Calculating The True Cost Of Owning A Home

Many people dream of owning their own home, but they may not realize how much it actually costs. Buying a home is not just about paying the mortgage and the taxes, but also accounting for other expenses such as maintenance, repairs, utilities, insurance, and more.

## Step One

Determine the purchase price of the home, which is usually the largest expense. You will need to factor in the down payment, the closing costs, and any fees or commissions involved in the transaction. The down payment is the amount of money you pay upfront to secure the loan, and it typically ranges from 3% to 20% of the purchase price. The closing costs are the fees and charges that you pay at the end of the transaction, such as appraisal, title insurance, escrow, recording, and transfer taxes. They usually amount to 2% to 5% of the purchase price. The fees or commissions are the payments that you make to the agents or brokers who help you buy or sell the home, and they can vary depending on the contract and the market.

## Step Two

Calculate the monthly mortgage payment, which is the amount of money you pay to the lender every month to repay the loan. The mortgage payment depends on several factors, such as the loan amount, the interest rate, the loan term, and the type of loan. You can use online calculators or formulas to estimate your monthly mortgage payment based on these variables. For example, if you borrow \$200,000 at a 4% interest rate for 30 years with a fixed-rate loan, your monthly mortgage payment would be \$954.83.

## Step Three

Add up the other monthly expenses that come with owning a home, such as property taxes, homeowners insurance, homeowners association (HOA) fees, utilities, maintenance, and repairs. Property taxes are the taxes that you pay to the local government based on the assessed value of your home. They vary by location and can change over time. Homeowners insurance is the coverage that you buy to protect your home from damage or loss due to fire, theft, natural disasters, or liability claims. The cost of homeowners insurance depends on several factors, such as the value of your home, the location, the coverage amount, and the deductible. HOA fees are the dues that you pay to a community organization that manages and maintains common areas and amenities in your neighborhood. They can range from a few dollars to hundreds of dollars per month depending on the services and facilities provided. Utilities are the bills that you pay for water, electricity, gas, trash collection, internet, phone, and cable. The cost of utilities depends on your usage and the rates in your area. Maintenance and repairs are the costs that you incur to keep your home in good condition and fix any problems that arise. These costs can vary widely depending on the age, size, and condition of your home and can include things like painting, landscaping, pest control, plumbing, roofing, flooring, appliances,

and more.

## Final Step

Add up all these expenses and divide them by 12 to get your monthly cost of owning a home. This number will give you a realistic estimate of how much money you need to spend every month to own a home. You can compare this number with your income and savings to see if you can afford it or not. You can also use this number to compare different homes and locations and see which one fits your budget better.

Here is an example of how to calculate the true cost of owning a home:

Purchase price: \$250,000

Down payment: 10% (\$25,000)

Closing costs: 3% (\$7,500)

Fees or commissions: 6% (\$15,000)

Loan amount: \$225,000

Interest rate: 4%

Loan term: 30 years

Monthly mortgage payment: \$1,074.18

Property taxes: 1% (\$2,500) per year

Homeowners insurance: \$1,200 per year

HOA fees: \$100 per month

Utilities: \$300 per month

Maintenance and repairs: \$200 per month

Monthly cost of owning a home = (Monthly mortgage payment + Property taxes / 12 + Homeowners insurance / 12 + HOA fees + Utilities + Maintenance and repairs) = (\$1,074.18 + \$208.33 + \$100 + \$100 + \$300 + \$200) = \$1,982.51

"El Chapo"

Dale A

Director of Marketing and Operations