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The True Cost of Home Ownership

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Deciding whether to sell your home – or when it is the right time to move – is difficult. You might have paid off the mortgage and think that your “free” home is a better, safer option for retirement. When you take a closer look and crunch the numbers, however, “free” could not be further from the truth. Should you stay in your current residence, or consider a senior living community? Get the facts.

cost of home ownership

“Even when your house is paid for, you’re still paying for it,” said Terence O’Malley, an estate attorney and expert in elder law and senior planning. O’Malley’s law practice specializes in family wealth and asset preservation through effective estate, retirement planning, trust and probate litigation and charitable gifting strategies.

O’Malley said, “Your money is trapped in a illiquid asset. It’s kind of like going to the bank and giving the banker $100,000 and the banker saying, ‘That’s fine, I’ll keep it for you, but it will cost you $5,000 a year.’ That’s kind of what you’re doing with your house.”

“You have to pay $5,000 each year, or whatever dollar amount it is, on repairs, maintenance, insurance and taxes,” O’Malley added.

Most homeowners are aware of the hefty price tag of a new roof or remodeled kitchen. What they might not realize is the smaller costs that add up, which could wipe thousands out of their savings. That’s the true cost of home ownership.

Forget the mortgage: Here’s why owning a home could cost you $10,193 each year to simply maintain.

Property Taxes: $2,149 a year

The average American household spends $2,149 on property taxes for their homes each year, according to the U.S. Census Bureau. WalletHub found the highest in New Jersey with a whopping $7,410 annually for a home priced at the state median value. Compare that to Alabama, where homeowners pay $543 on average.

No matter where you live, property taxes can be among the biggest expenses in keeping a home after a mortgage. Unfortunately for seniors on a fixed income, taxes typically go up. The 2017 average is about a hundred dollars more than last year.

Homeowners Insurance: $952 a year

The cost of homeowners insurance is also rising at a steady rate; up over 50% in the last decade. The average annual premium in 2017 is $952 across the U.S., according to Value Penguin. For those living in states more susceptible to natural disasters like hurricanes, it’s much higher. In Florida, you can expect to pay an average $1,991 annually.

Lawn Care: $691 a year

HomeAdvisor calculates the average cost to maintain your lawn at $691 annually. That includes basic mowing, fertilizing, watering, weeding and seeding older patches of the yard. It excludes extra budget-busters like gardening, landscaping and tree removal. Throw in snow removal, and you could be out another $75-$95 per storm.

Water, Trash, Electric Utility Bills: $2,921 a year

The U.S. Department of Energy estimates that the typical U.S. family spends at least $2,200 per year on energy bills – with nearly half for heating and cooling. If you’re living in an older home that’s less energy efficient, you can expect a higher bill.

On average, trash removal costs homeowners about $247 annually, according to HomeAdvisor’s 2017 report. That number varies depending on where you live.

Water bills can consume your budget, too. Across America, the price of water has risen 41% since 2010. Financial experts estimate the average American household spends about $474 each year on water and sewage charges.

Unexpected home repairs: $3,480 a year

The general rule of thumb is that a homeowner should expect to spend at least 1% of their home's value each year on repairs and general maintenance. For a $350,000 home, that amounts to about $290 per month, or $3,480 annually.

That doesn't necessarily mean you’ll spend $290 each month maintaining your house. It’s an average prediction by experts on what you’d need to save over time for general maintenance needs and repairs, such as roof replacements, new air conditioning, heating units and plumbing. Those are just the basic essentials. Updating your living spaces to lower the risk of home depreciation is a jaw-dropping slash to your savings.

O’Malley estimated he has sunk about $148,000 into his own home in the past 13 years, from a kitchen upgrade to roof repairs.

“I live in a middle-class neighborhood in a house built in 1961,” said O’Malley, “It cost $148,000. That’s just to keep your house to a marketable level.”

Then consider the risks beyond your control, like neighborhood foreclosures, crime increases, poorly-funded school districts, and natural disasters.

When is the “perfect time” to sell your house?

O’Malley offers advice for those uncertain about the right time to sell.

“If you think, ‘I’ll just wait a little longer and get a bit more money out of my house,’ then you are not only subjecting it to depreciation risks, but you are also depriving yourself of a lifestyle that is more suited for a senior.”

He suggests to get rid of the lawn mower, rake, snow plow, and worries about shelling out for costly home repairs. By moving into a retirement community, like Acts Retirement-Life Communities, you won’t be burdened with property taxes, appliance purchases and endless repair bills. Instead, you’ll enjoy amenities, a wellness center and fitness instruction, transportation and 24/7 security, entertainment, social and educational programs.

There’s also favorable tax credits and exemptions, and protection from the rising cost of health care. That’s fundamental peace of mind. You can add up the numbers and scrutinize your budget, but it’s hard to put a price tag on worry-free living.

Visit Acts for more information on the hidden cost of home ownership.

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