A Guide To Budgeting for New Homeowners
Buying a home is a common goal, and it's usually the most significant purchase people make in their lifetimes. Once the house buying process is complete, you'll know exactly how much your monthly mortgage payments will be. However, determining your utility costs is trickier, particularly if you moved from an apartment to a home.
Utility Costs to Consider
Based on a 2,000-square-foot home, a rough estimate for utility costs is $400-$500 per month, including electric, natural gas, water, garbage and internet service. Electric and gas costs vary according to usage, and your bills will also be higher if you live in an area with a colder or hotter average climate. Of course, the impact on your budget depends on what you paid for utilities at your previous residence. For example, moving from a one-bedroom apartment to a 2,000-square-foot home would significantly increase your heating, cooling and water usage, resulting in a considerable difference in utility costs.
Maintenance and Home Repairs
Predicting maintenance and home repair costs is challenging because we never know when our roof will leak or when our garage door will break.
Generally speaking, you should estimate annual maintenance costs between 1% and 4% of your home's value, based on factors such as the size and age of the home. For example, a small house under 10 years old valued at $300,000 could have maintenance costs as low as 1% or $3,000 per year. On the other hand, a home with the same value that's 40 years old may need significant repairs and could push the maintenance costs closer to the 4% or $12,000 per year mark.
Purchasing Appliance Warranties
Many people have to buy new appliances before moving into a home. If your new refrigerator or washer stops working and you don't have an extended warranty, you could be out hundreds of dollars to replace it. Purchasing an extended warranty will typically come with repair or replacement coverage for 1-3 years from purchase.
Not paying out of pocket for appliance repairs can offset higher utility costs.
Inquire Locally About Utility Costs
If you have a local friend or family member who lives in a similar-sized home to yours, they could give you an idea of what their utility bills average. Your real estate agent may also have an idea.
Additional Ways To Save
There are usually ways to cut back on expenses if the cost of your utilities is using up more of your budget than expected. For example, you might decide to cancel a few of the multiple streaming services if you rarely use them. Skipping the daily Starbucks or packing lunch a few times a week could also put more money in your pocket, and before you know it, you'll have saved enough to cover a utility bill.
Finally, emergency savings go a long way to filling in your budget during times of higher utility bills.
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