Real Estate

Owning Versus Renting

What are some examples of house purchase costs that I should anticipate?

You should consider the price paid for the house if you pay cash, or the amount you put down if you obtain a mortgage, closing costs, appraisals and fees, moving costs, and furnishing costs (if necessary). For costs you might incur during the course of a year, you might expect to pay for maintenance, property taxes, homeowners’ insurance, homeowners’ association fees (HOA fees for a condominium), utilities, and any renovation work that needs immediate attention. If the house appraises out for more than you paid for it, congratulations on earning an immediate benefit to purchasing the house! You will know this quite some time before you actually close on the purchase of the house. Also consider the lost opportunity of having to redirect money from other investments such as mutual funds that may have been earning a certain decent return per year in order to purchase the house.

You also should consider the tax advantage of the interest on the mortgage deduction. Consult your tax adviser or real estate professional, who can give you a rough idea of the benefits, depending on your status and income during that year. As for determining the approximate cost of your property taxes, you may contact your local tax authority, give them the house’s address and sale price, and ask for a tax estimate. Remember that local property taxes may be quite different from what is reported on the real estate listing information; they are based upon the last sales price, as well as local tax codes that may have changed over time.

If you plan to sell the house after a relatively short period of time, you need to consider many expenses, such as broker/real estate sales commissions and payment of the original mortgage balance due.



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