Look past buying to the first year of expenses you’re likely to incur

By Benjamin Szweda

AAA World Article

Buying a house brings with it many big decisions from the first question of how much house you can afford, to how much money you should put down. To be truly financially prepared for your first year as a new homeowner though you need to look past acquisition and think through the first year of expenses you are likely to incur. Some of these may include utilities, taxes, homeowner association (HOA) fees, lawn care and snowplowing expenses, home repair costs, new appliances, furniture purchases and a slush fund for cosmetic changes to the things you thought you could live with but will soon decide you can't.

If the home you’re moving into is very old, your costs may be higher. Additionally, if you are moving from a smaller to a larger home or from an apartment to a house your costs may be more significant. Finally, if moving from a roommate living situation where you weren’t responsible for furnishing the whole house, you will need to calculate additional costs as well. 

To ease your worry, one final note before exploring some of the hidden costs of being a first-time homebuyer. These costs do tend to taper off. In research conducted by the National Association of Home Builders (NAHB), it was found that homebuyers tend to only outspend non-moving homeowners for the first two years after moving. Additionally, while homebuyers that are previous homeowners will still experience more costs than non-moving homeowners, those costs will likely be lower than the costs for first-time homebuyers.

In examining spending habits from 2012 to 2014, the NAHB found that first-time homebuyers will spend $3,094 on appliances throughout their home in the first year. This is 64% more than homebuyers that have owned a house before and 162% greater than those who do not move. Reasons for the expense may be because the appliance was old or not in line with current tastes. Surprisingly though the NAHB reported that only 36% of houses sold included refrigerators, so you might be buying out of necessity.

Furniture was the largest expense at $3,778, with new sofas at the top of the list. To spread the cost of furniture out, you might consider gradually buying and storing some pieces during the year leading up to your move. When in the new house you can also focus your design efforts on one room at a time, leaving some spaces empty until you can complete them as desired.  

Some repairs will have to be done as soon as you move in. Maybe there were a couple of items highlighted in the home inspection that have not been fixed yet, or perhaps the character of a century-old house attracted you and you have a lot of work to do. The NAHB's research saw the average new home buyer spending $3,729 in this category.

To soften the blow of future repairs, allocate funds into a reserve account. When you know something only has a life span of five years, divide the estimated replacement cost by that time frame and save a little money each month so when it comes time to purchase the replacement you have all the cash needed. This makes buying a new hot water tank or getting a new roof, which can easily cost upwards of $10,000, much less painful.  

Property taxes are based on your local government’s assessed value of your home. This is likely different from the price you will pay for a house; it could be higher or lower, and it will change. To be prepared for your tax bill know the current tax cost, know when value reassessments reoccur and the options available if you disagree with the assessed value. 

Along with death and taxes, utility bills can also be counted on to reoccur regularly. Zillow, the real estate website, and Thumbtack, the site that matches homeowners with professionals, estimate that the average American homeowner can expect to pay $6,330 a year in taxes, utilities and insurance. Of course, you can spend more than $6,000 in property taxes alone depending on the area you live in. But in Cincinnati, OH, for example, costs for all three averaged $5,951.