The Extra Costs of a Mortgage

A mortgage payment is similar to a rent payment, but there are differences. Both represent the amount you pay for your housing needs and are a significant part of your monthly budget. A mortgage is preferable in that it finances an important asset, but you need to plan ahead for the additional costs that come along with it.

Homeowners and Taxes

You must pay your annual property taxes. Rates fluctuate widely across the country, but the national average is 1.29% of the value of the home.

Association Fees

You will almost certainly be required to pay for some kind of home owner’s associate fee. These associations are important and to protect your property values, but there is a cost for their services. This expense depends on the scope of the associations’ influence.

Higher Utility Bills

Your living space in an apartment is well insulated and relatively small. A home that stands on its own is a different matter. Many underestimate the cost of additional utilities expenses. Higher electrical bills to heat or cool your home can sneak up on you.

Maintenance and Repairs

When you were renting, you only had to pick up the phone and make a call to get something fixed. Now you are responsible for repairs and maintenance. As a general rule, you should budget about 2% of your home’s value every year for this expense.


You must carry protection against losses. Your mortgage lender will want the collateral on the loan secured. Average annual costs for homeowner insurances is between $300 and $1000. If you have put less than 20% down on your home, you will be expected to carry an additional property mortgage insurance policy. This can cost you as much 1% of the total of your loan annually.

It can seem overwhelming, and all of these costs add up. Fortunately, your mortgage broker is ready to help you decide on budget for a home that you can safely afford.

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