When searching for a new home, many buyers will focus only on the list price and what they may need to offer to get the property. For example, a buyer might think, “We can get this house for $XX. That’s within our price range!”
Of course, the selling price plays a pivotal role in whether or not you can afford a particular home. But, carrying costs should also be considered.
What's A Carrying Cost?
For homeowners, carrying cost refers to the expenses that are incurred by owning and maintaining a home. These expenses can include:
- Mortgage payments: If the homeowner has a mortgage on their home, they will need to make monthly mortgage payments.
- Property taxes: Homeowners are also responsible for paying property taxes to their local government. The amount of property tax varies depending on the location and value of the property.
- Home insurance: Homeowners need to purchase home insurance to protect their home and personal belongings against damage or theft.
- Maintenance and repair costs: Homeowners are responsible for maintaining their homes and making repairs when necessary. This can include expenses such as painting, plumbing, electrical work, and roof repairs.
- Utility bills: Homeowners also need to pay for utilities such as electricity, gas, and water.
All of these expenses are part of the carrying cost of owning a home, and they need to be taken into account when budgeting for homeownership. But there may be other expenses. For example, a home may also have a subscription-based alarm system, high-speed internet, and hot water tank rental. If there are common elements, such as a private street or some other neighbourhood feature, there may be an annual maintenance fee. Make sure to factor in all of the above costs and other associated expenses with buying a new home.
It’s also smart to factor in predictive maintenance and repair costs, especially when buying an older home. A property that hasn’t had its asphalt roof shingles replaced in 20 years may be due soon. Carrying costs can completely change your initial outlook on a property.
So, when shopping for a new home, consider what the carrying costs will be. That will help you make a more informed decision.
That being said, having to pay a little more in monthly costs may be worth it if you love the place (as well as the neighbourhood) and it has everything you want. By planning and budgeting for carrying costs, first-time home buyers can make informed decisions and avoid financial surprises down the road. By understanding the full cost of owning a home, including all the expenses listed above, homeowners can make informed decisions about whether or not they can afford to buy a particular property.
If a homeowner doesn't consider carrying costs before buying a home, they may find themselves struggling to make ends meet as they try to cover all of the expenses associated with homeownership. This can lead to financial stress and missed mortgage payments. In addition, carrying costs can also impact the long-term financial return on home investment. By factoring in all the carrying costs of owning a home, homeowners can better understand the total cost of ownership and make informed decisions about whether or not a particular home is fit for them
Overall, it's important for homeowners to carefully consider carrying costs before buying a home, as they are a crucial part of the financial commitment involved in homeownership.