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Buying a Home: Consider the Monthly Cost of Living

Maybe you're thinking of buying a house, and you're trying to get a handle on what your expenses will look like in the future. Or maybe you're thinking of buying an apartment, and you're trying to understand that mysterious thing called "maintenance" (or possibly "common charges" or "HOA dues"). Any way you slice it, if you're thinking about buying property, figuring out your monthly expenses is going to be a top priority.

It may help you to think about expenses in these top six categories:

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1. The Mortgage(s)

If you're buying a house, you're probably going to have just one mortgage (see Resources below), the personal loan that you take out from the bank to purchase the property. If you're buying a co-op apartment, you'll have your personal loan (which you're technically using to buy shares of the co-op), and the apartment will have an underlying mortgage as well -- to pay for the land that the building sits on. Payments on that underlying mortgage are made by the co-op, and a portion of those payments is charged back to you in your monthly maintenance.

2. Labor

In an apartment building, there is often a staff doorman who greets people and provides security, a porter who takes packages and takes out the trash, and a superintendent who fixes busted sinks. Though tips are extra (see Resources below), staff salaries (and often their vacation and health benefits) go into your monthly charges. That's why doorman apartments usually have higher monthly charges than non-doorman ones. If you own a house, you're not paying directly for labor -- but you'll want a budget for lawn upkeep, gutter cleaning, snow shoveling, etc., unless you do everything yourself.

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3. Property Taxes

With a condo or a house, you pay these separately. You might get billed quarterly by your city or county, or your bank might make the payments and fold them into your mortgage. With a co-op apartment, your share is part of your maintenance. The good news is, property tax payments are usually tax-deductible. You should get an annual letter from the co-op telling you how to figure your deduction; if you pay your taxes through your mortgage, the bank will send a statement once a year, usually in February. If you pay straight to the city or county, don't forget to save receipts.

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4. Ongoing Maintenance

Every three to five years, you'll probably want a fresh coat of paint; every ten years, you're probably going to need a new washer/dryer; every 20 years, you're probably going to need a new roof. Apartment buildings budget for this kind of thing, and it's part of their monthly charges. Homeowners should try to put away 2 to 3 percent of their purchase price per year for these kinds of expenses. Sometimes homebuyers (especially first-time homebuyers) can't find that money, but it's worth the effort. That budget might seem high for one year, when all you do is paint, but for the year you redo the kitchen or fix a sagging porch, you'll be glad to have the money.

5. Utilities, Including Heat

The easiest way to guess what your utility costs are going to be is to ask the previous owner to show you his bills. In an apartment building, find out what charges are paid for on a building level (often heat and hot water) and what charges you'll pay for as an individual owner (often cable and gas). Even if you don't see an individual bill, don't forget to conserve energy (see Resources below); it's good for the planet.

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6. Insurance

You'll probably get different kinds of insurance: title to protect you from a fraudulent sale; homeowner's to protect you against property damage (see Resources below), and maybe flood to protect you against heavy rains and leaks. The total cost will probably be a few hundred to a few thousand, depending on how fancy your property is. Don't forget to review your insurance coverage once or twice a year, as part of your financial check-up.

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Originally published on LearnVest.com; republished with permission.

Copyright © 2012 Meredith Corporation.

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