Total Cost

What is the total cost of home ownership? I’d say it’s not an easy thing to get to because much of the costs are monthly, quarterly and annual so figuring out how much you spend on your living quarters is a little complicated.

I do think we can come up with a budget of sorts to estimate what you need to spend, save and plan for however.

I’ve got a client currently looking at a range of houses from $170K up to about $210K and the question came up, how much is the difference monthly so I thought I’d write it up.

Here is a quick spreadsheet showing my numbers and then I’ll explain each entry.

I included utility cost to help create a budget but you’d have those costs even if you rented a place. There are lots of good reasons to buy and we’ll cover those in another post but for now, use this as a guideline for your budget.

Principle and Interest (4% 30yr) USDA Loan- Currently you can get a loan for about 4% and I presumed a 30 year term to keep the payment low.

PMI – This is mortgage insurance paid to USDA. They charge 0.35% of the loan amount annually, divided up into 12 monthly payments.

Taxes – I estimated $2000 on the 1st house and $2500 on the 2nd one. These are estimates but should be pretty close to actual.

Insurance – Hazard insurance is a big variable but I estimated $750 per year on house 1 and $1000 per year on house 2.

Total Elec – Being USDA, many of the houses are in areas where it’s total electric so you have a heat pump and the cost would vary depending on your settings, age of the system, etc. This amount is an estimate based on my own home with about 2700 sq ft and we like it cold in the summer.

Water Bill – if you have public utilities it will likely include city or county water supply. Septic systems save a little money monthly but you have to plan on pumping them out every 3-5 years. That’s included in the maintenance numbers below.

Trash / Recycle – Most areas have trash and recycle pickup so you pay a quarterly fee for that. I divided it out monthly and this is the number I estimated.

Improvements – You will want to do things to your castle. We built a deck, painted and replaced some fixtures right when we moved in. I am basing this on about 1% of the cost of the house and budgeted it out monthly. Your mileage may vary.

Maintenance – This is also a big variable but if the house is in reasonably good shape and the mechanicals are pretty new I’d say budget about 2% toward maintenance. You’ll have to repair and replace things as they break or wear out and some of those things can be expensive. I’d suggest considering a home warranty if your budget struggles to handle this and that could save you a bad surprise. Cost of a home warranty can be between $500 and $1000 annually depending on coverage and company and will cover the majority of the cost for most appliances and the HVAC. It usually won’t cover the roof or plumbing problems outside the house.

Lawn Care – I hate cutting grass. It takes me about 3 hours every time I have to do it and I figured I could use that time much better. The cost here is what I pay someone to cut, edge and blow the yard, weekly and as a bonus he cleans my gutters in the fall. I think it’s a good deal but you can decide to buy a mower and do it all yourself.

Landscaping / weeds – We live in an HOA and I got the infamous ‘weed’ letter a while back so I hired a company to come treat for weeds. This is about what it costs.

HOA Dues – This varies a lot too depending on the neighborhood. You might not have this expense but many folks do.

That’s about it for this post. Keep in mind, these are estimates and many things affect the numbers so be careful using them. It’s intended to show differences between a smaller house and a bigger one.

I’d love to hear your comments below.

Thanks for listening,
Jerry Robertson
678-231-1578 Cell

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