Mike Winters at CNBC reported that the extra costs of owning a home now top $23,000 a year, and unlike a fixed mortgage payment, property taxes, insurance, maintenance, utilities and repairs all move with inflation, local policy and the weather. He asked how buyers get caught.
Buyers who stretch their budget based mainly on the monthly mortgage payment can leave themselves financially exposed after move-in. The lender qualifies you on principal, interest, taxes and insurance at today's numbers. Nobody qualifies you on next year's insurance renewal or the water heater.
I shared a client example. They stretched to buy near the top of their approval range, and the mortgage payment fit the budget. Then an $8,400 property tax bill arrived, the homeowners insurance premium jumped 22% at renewal, and the water heater failed eight months after move-in. They got by, but just barely, and the emergency fund that was supposed to cover a job loss went to a house that had done nothing unusual.
My rule for buyers is to build the housing budget on the full cost of ownership, not the mortgage. Take the payment, add 1% to 2% of the home's value per year for maintenance, add the real insurance and tax numbers for that specific property, and see whether the result fits with margin. If it only fits at the mortgage payment, the house is too expensive, no matter what the lender says you can borrow.
Read the full article at CNBC →
