5 Financial Facts on Home Ownership

This is my actual home sweet home

May 3^rd will mark the one year anniversary of living in my new home.  Technically I have already owned it for a year, but I was living in a rented home while I fixed it up for a couple months.  Since this is my first house, let me explain the 5 most relevant financial facts about home ownership that I have discovered.

Prices Are Still Dropping…

I love my house, I love my neighborhood, and I love my location.  What I don’t love is the rash of foreclosures and short sales within my immediate proximity.  Here I thought I was getting a great deal, collecting the $8,000 tax credit, and basically buying at the bottom of the market.  Guess what? I was wrong, we have yet to see the bottom.  A friend of mine recently purchased a home in the same neighborhood for $30,000 less than what I paid, or about a 15% reduction.  I even received a notice from the city that my property taxes were going down about $160 this year, which I thought was pretty cool until I realized that they are based off the assessed value of my home.

I Itemize My Taxes

I never had near enough in deductions to justify itemizing when I file taxes each year.  I received my largest tax benefit of my life in 2010, and I didn’t even own the home throughout the entire year.  Obviously, the more interest you pay equates to more you can write off, so please view this benefit with some rationale.  Interest is never a good thing, but neither is paying rent that you will never get return on.  Rent is essentially a forgone payment, while paying your mortgage is truly an investment into your future.

What Are All These Other Monthly Expenses 

You always hear about the TOTAL cost of homeownership, but it doesn’t always resonate with us the way it should.  We get that it’s not just the mortgage, but property taxes, home repairs, association dues etc.  However, it’s actually about utility bills as well.  I need to replace the windows in my home, the wind can actually cause my blinds to shutter when the windows are closed! That to me signals a problem.  I pay about $230 a month for my gas bill during the winter months.  My electric bill is about $180 during the summer months (think air conditioning).  My house is 2,300 square feet, its not small, but I also shut the vents in every unused room in the house, including the basement.  A friend of mine recently replaced his windows and instantly saw a $50 monthly reduction in his gas bill, and his house is half the size of mine, so maybe I will see a $100 reduction whenever I can afford to replace mine.

How I Hate the Snow

I was trying to save money, and increase my exercise regimen by putting off the purchase of a snow blower.  I live in the Metro Detroit area, so we were consistently bombarded with snow a better part of the winter.  Regardless, I opted to pay $10 for a shovel as opposed to $500 for a blower.  Now if you live in my area and you think to yourself, “I don’t even use the sidewalks, I’m not shoveling mine”, well you should rethink that, since my subdivision association and the city will levy a $100 fine against me for failure to do so.  I don’t use the sidewalks during the winter months, but I guess some people do!

Is Bigger Really Better?

I suppose this question is totally dependent on what we are discussing, however, in this case it is a house.  I think the satisfaction derived from the size of your home is entirely based on individual preference.  Some would rather have less to clean, some want more house to show off, some families have more children, some have less.  What I learned about having a larger than necessary home, is that I have a lot more space to furnish.  It cost me $1,700 for a living room set, which consists of two couches, two end tables, and one coffee table.  The dining room table was $1,000 (and a present from my mom, thank goodness).  Luckily I already had a bed, but I still need a bedroom set. Besides that, the rest of the house, the three other bedrooms, and the living room all remain vacant a year later.

It seems like I am complaining about homeownership, and I don’t want to come across that way.  I really do love my house, but I wanted to play devils advocate for a moment so in case you are thinking of taking the leap you will at least know some of the lesser known issues with buying your first home.