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Many first-time home buyers do not consider all the costs of homeownership. They focus on the mortgage payments they will make each month. Unexpected costs and expenses could cause a first-time buyer financial hardship. Our Massachusetts bankruptcy lawyer discusses homeownership costs and tips for managing money to avoid financial problems.
Examples of Homeownership Costs for First-Time Buyers
Are you purchasing a home for the first time in Massachusetts? If so, you are likely obtaining a mortgage to finance the home’s purchase price. Therefore, you understand you will have monthly mortgage payments and have budgeted for those payments.
However, your mortgage payments are not the only expense of home ownership. Here are other expenses that come with owning a home:
Property Taxes
Property taxes are assessed each year based on the home’s fair market value. Typically, mortgage companies escrow taxes by adding 1/12 of the taxes to your payment each month. Then, the company pays the property taxes.
Homeowners Insurance
Homeowners insurance covers your home if it is destroyed or damaged by fire or other catastrophic events. Understanding exclusions, such as damage from floods or windstorms, is important. You may need to purchase additional coverage for these events. As with property taxes, most mortgage companies escrow homeowners’ insurance.
Homeowners Association (HOA) Dues
Ask if your home is part of a homeowner’s association. If so, you will owe HOA dues each year. Some HOAs charge fees monthly. HOA fees could add $200 or more to your expenses each month.
Utilities
Do not forget to budget for electricity, gas, water, and sewer. Internet and cable are included in your utilities. Each of these expenses must be paid each month. If you get behind, the company will turn off the service.
Maintenance and Repairs
This category of homeownership expenses can be the toughest for first-time buyers. It is a wild card because you never know when something may need to be repaired. Repairs and maintenance can be expensive. However, regularly maintaining your home can reduce unexpected costs.
Tips to Help You Manage Payments and Money to Avoid Financial Problems and Bankruptcy
Smart money management can help you avoid financial problems and bankruptcy. Tips for effective money management include:
- Track spending to become aware of where your money is going. Knowing where you spend your money helps you identify areas you can cut.
- Create a realistic budget that includes all expenses and bills. If your budget is unrealistic, you will not follow it.
- Include a “bill” on your budget for an emergency savings account. An emergency fund helps you pay for unexpected expenses without borrowing money or causing a financial strain.
- Pay bills on time each month. Building and maintaining a good credit rating is vital for financial health.
- Identify services and subscriptions you could cancel to save money.
- Create a list of short-term and long-term goals. Include large purchases you anticipate and would like to make. Then, save for the major purchases instead of incurring debt.
- Try to pay down debts to increase your disposable income.
A key to healthy financial management is not spending more than you earn. It can be challenging to stick to a budget, but it will improve your finances.
Sometimes, circumstances beyond your control may cause financial hardship. If you cannot recover without help, discuss debt relief options with a bankruptcy lawyer.
Call Our Massachusetts Bankruptcy Lawyer for Help
If you struggle to pay your mortgage payments and home ownership costs, filing for bankruptcy could help. Chapter 13 allows you to reorganize your debts to afford your mortgage payments again. Call Logan A. Weinkauf, P.C., to schedule a free consultation with our Massachusetts bankruptcy lawyer.