You’re an apartment-dweller and have heard lots of people tell you to put down an offer on a home, saying it is better to have a mortgage than pay rent because you’re working toward owning value. While this is indeed true, people need to be aware of some hidden costs of owning a house:
In a worst-case scenario, your property value can soar after you buy, actually raising your mortgage payment. This is because your mortgage-holder usually pays the property taxes on your home. Taxes and property insurance are paid for through the escrow part of your mortgage payment. While your mortgage interest rate is indeed locked in, your property value, and thus the taxes you owe on it, can rise. The mortgage-holder will raise your payments to cover an escrow shortage, which is when your accumulated escrow fund does not cover this increase in tax.
To prepare for this, keep tabs on the prices for homes in the surrounding area. When the city or county sends you a letter informing you of an increase in your property value, often providing you a time and date to argue against it in a hearing, gather evidence that your property should not be appraised so high and go to the hearing.
Even if your property values aren’t bound to rise and increase your mortgage payment, consider increased costs from now owning a yard. When you move into a home with a lawn and back yard, the costs will stack up quickly. You should plan to have a higher water bill (which can be a double-whammy since many apartments pay for water) and a slew of new expenditures ranging from a lawn mower to gardening tools to plants and plant food for those new flowerbeds.
Finally, the sheer volume of new space will likely cause an increase in spending, both in terms of utilities and in terms of furnishings and decor. It can cost a lot to outfit a new home and not leave sections of it looking bare. If you don’t want to have budget overruns when furnishing your home, plan ahead of time to see what all you need, instead of furnishing piecemeal, and stick to the plan. If you start off buying more expensive pieces of decor in the beginning you will feel compelled to continue buying similar-quality pieces to finish the house, costing you more than you anticipated.