If you are planning on buying a home in the near future, it is important that you budget for all the costs associated with it. In addition to your monthly mortgage payment, you will also need to pay taxes as well as cover the cost of utilities and maintaining the property.
Property taxes are generally included in the closing costs that you pay when buying a home. In California, the property tax rate is 1% of a home’s assessed value. However, additional taxes can be levied if they are necessary to pay off state or local bonds.
While property tax rates increase as home values increase, they cannot rise by more than 2 percent of the home’s sale price in a given year. It is also important to note that California exempts the first $7,000 of a home’s value from property tax calculations. There are ways to save money and not have to pay the full price of property tax increases. Start by getting in contact with your city’s assessor’s office. You can appeal for a reassessment of your property tax, which can lead to them waving increases. Keep in contact with them and ask about your property’s assessed value, because many times it will get overvalued in the books to increase the taxes made off your property.
According to this source, fees related to sewer, water, electricity, and telephone service will add extra costs to the price of your property. You can expect to pay a minimum of $200 to $300 a month on these infrastructure fees and other services. If you have a cell phone, it may not be necessary to have a landline installed in your home unless you want to use a phone line to access the internet.
Maintaining the Property
At some point, you will need to make repairs or upgrades to your home. In some cases, you will know about the leaky roof or the water heater that needs to be replaced before you buy a property. However, it is also possible that a pipe will burst or that an appliance will stop working without warning.
It may also be necessary to mow your lawn, shovel your driveway or take care of other routine maintenance tasks around the home. This could result in the need to buy a lawn mower or other equipment to take care of these tasks. These purchases could easily cost hundreds or thousands of dollars that you may not have budgeted for prior to taking possession of your home. A popular rule of thumb for annual maintenance is 1%. That may be too low though, as many homeowners report spending 1% to 4% of their home’s value each year on maintenance and repair.
If you are ready to purchase a home, be sure to account for all the costs related to doing so. Taking this step may prevent you from being house poor. You can talk to a loan consultant, a real estate agent or others who have purchased a home recently to determine how to create your home buying and ownership budget.