Sunday, June 15, 2008

The expensive reality of homeownership

When I started telling others I was planning on buying a house, I received my share of "You can write it off on your taxes" comments. My perception was my mortgage payment would be subtracted from my taxes, but the reality is the only items I can write off are my mortgage interest and my property taxes, and then only a percentage of these (based on my income tax rate).

When I bought my house, my mother said to me "Congratulations on owning a piece of real estate." However, signing up for paying a mortgage for 30 years did not prepare me for all the costs of homeownership. Here are a few things I knew about but did not truly think through the effect on my finances:

Landscaping and lawn mowing
Among the tree trimming (to keep the lone tree I had in good condition), shrub removal (because I hated what was on the property) and figuring out what plants and shrubs I wanted to install, the costs added up. I paid arborists to take care of my tree and remove unwanted shrubbery. While I may have planted the new landscaping myself, the costs were not cheap whether I purchased a plant, bare-root stock or bulbs. In addition, I had to spend extra money on appropriate amendments or fertilizers plus my time and energy to plant all these things around the house.

In the warmer weather, lawn mowing is one of those neverending chores, and when I first moved into the house, I did not have a lawn mower. My first (and only dip) into the water of hiring a neighbor boy failed badly so I ended up buying my electric mower before I saved the money for it, and mowed the lawn myself. I do not like mowing grass, but am too cheap to hire someone else. This means I have to spend at least 1.5 hours mowing my small lot and grumbling about the work as I bat away insects. This was not highlighted during the home-purchase process.

Home maintenance
Taking care of the home is more than fixing things when they break; it is also preventing catastrophic failure. For example, I am painting the siding on my house because it is starting to crack and peel. While I do not perform the job of professional, I am doing a patch job until I can convince my neighbor, who owns the other half of the duplex, to have the entire structure painted. By painting in between professional repainting, I prevent any damage from occurring to the wood exterior.

I also have to do things like change the furnace filter regularly, add salt to the water softener, empty out the bucket on the dehumidifier and have the furnace and AC unit checked. Again, these are reasonable steps to take to keep the house working well, but not detailed in that homeownership document it took over an hour to sign.

Utility bills
In my apartments, I was responsible for heat, electric and phone. Sometimes heat and electric were the same thing. While I had a number for water, sewer and natural gas from the previous owner, I did not realize how much higher these numbers were until I started paying these bills. In winter, the natural gas-fueled furnace means a high bill; in summer, the electric-powered AC unit means the electric bill reaches untold heights. On average, I pay at least twice as much for utilities (which includes water and sewer) as I did when I was in an apartment.

Mortgage and property taxes
I did make sure I could afford my house with the escrow included. My monthly payment came in just under what I felt comfortable paying. However, my mortgage (plus escrow and PMI) was more than my rent and with the increase in my utility bills, I found more of my income was committed to fixed expenses. While I can pay my mortgage and other bills with nary a wince, I realize that with so much of my money dedicated to these expenses, I have fewer resources to save.

While property taxes can be subtracted from a tax bill, they can also be raised in a dramatic fashion. While the payment on my house will never change since I chose a 30-year-fixed-rate mortgage, the property taxes do vary from year to year. Depending on the assessment or the financial strength of the city I live in, my monthly payment may be more than I wanted to pay and pinch the spending plan even more.

While I am happy to have a home and be able to decorate and customize as I would like, I did not weigh all the financial consequences of the purchase. I had taken into account what I could afford and knew my utilities would be higher, but the more irregular maintenance and replacement expenses were not considered. Many people consider a home an asset, but it has great expense associated with its use and maintenance even when divided over time. Truly look at yourself and your finances before diving into homeownership. It is a tough (and expensive) job, but you may find such challenges rewarding.

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