I rent, how will my expenses change if I buy a home?

Photo by Nathan Fertig on Unsplash

Quick Answer.

Your expenses are very likely to go up. Your rent will be replaced by the cost of your mortgage, property tax, home insurance, utilities, and maintenance. Your bank will likely require you to include your property taxes and insurance in your mortgage payment (it’s called escrow). However, most people forget they will be responsible for all maintenance and full utilities (water, sewer/garbage, electricity, and gas).

This is why.

• Consider your maintenance costs. If you have been renting, it is likely that you have not had to pay for taxes, home insurance, maintenance, or all utility costs (e.g. water, sewer, garbage, electricity, gas). As a homeowner, you will be responsible for all these expenses. Depending on your city, these costs can add up to 25% of your mortgage payment (plug, we estimate these expenses for you in our app).
• Property taxes adjust yearly. Property taxes are based on a percentage of the value of the home determined by your County Assessor each year. It’s public information, so you find it online at your County Assessor’s website (e.g. for Seattle, it’s the King County Assessor). This tax is usually paid yearly or bi-annual.
• Property taxes vary greatly across the US. The average American pays close to $3,000 a year in property tax. However, that number can be over $9,000 in New Jersey and under $600 in Alabama. Check your County Assessor website for your local property tax rate.
• Taxes and insurance can surprise you. Most mortgage lenders will give you an option to include your property taxes and insurance in your mortgage payment. We strongly recommend you do that. Otherwise, you will need to set aside money each month to make semi-annual payments for taxes and insurance.

Go further.

1. How much home should I buy?
2. I have good savings, a stable job, and a good salary. Should I buy a house?
3. Use the Mogami App to estimate the impact on your finances of buying a home.

About Mogami. Our mission is to bring simple, creative, and effective financial assistance to everyone. No more hourly fees, asset minimums, long appointments, or financial jargon. Follow your own design, step-by-step, and see your future take shape. Beautifully. [Learn more →]