When buying a house, a mortgage is often the only way to make the purchase happen. While the monthly mortgage payment is the most well-known cost associated with homeownership, there are many hidden costs that come with a mortgage that can add up quickly. First time home buyer program for expert guidance and support throughout the mortgage process. In this article, we will outline the hidden costs of a mortgage and what you need to know before you buy.
- Closing Costs
Closing costs are fees associated with closing the mortgage and can include items such as title search fees, appraisal fees, and attorney fees. These costs can add up to thousands of dollars and can come as a surprise to many homebuyers. To avoid any unpleasant surprises, be sure to ask your lender for a Good Faith Estimate of the closing costs so you can factor them into your budget.
- Property Taxes
Property taxes are a cost of homeownership that many people overlook. Property taxes are based on the assessed value of your home and can vary greatly from one area to another. In addition, property taxes can increase over time, so it’s important to factor this cost into your budget when buying a home.
- Homeowner’s Insurance
Homeowner’s insurance is required by most mortgage lenders and protects your home and belongings in the event of damage or loss. Homeowner’s insurance premiums can vary greatly depending on the coverage you choose, so it’s important to compare policies and choose the one that best fits your needs and budget.
- Maintenance and Repairs
Maintenance and repairs are another cost of homeownership that can add up quickly. From fixing a leaky faucet to replacing the roof, these costs can be substantial and can come at the most inconvenient times. To prepare for these costs, it’s a good idea to set aside a portion of your monthly budget for maintenance and repairs.
- Private Mortgage Insurance (PMI)
If you make a down payment of less than 20% on your home, you may be required to pay Private Mortgage Insurance (PMI). PMI is an insurance policy that protects the lender in the event that you default on your loan. PMI can add hundreds of dollars to your monthly mortgage payment and can last for several years, so it’s important to factor this cost into your budget when buying a home.
- Prepaying Penalty
Many mortgage loans come with a prepaying penalty, which is a fee that you will have to pay if you pay off your mortgage early. This penalty can add up to thousands of dollars, so it’s important to understand the terms of your mortgage and factor this cost into your budget.
- Refinancing Costs
If you decide to refinance your mortgage, there will be costs associated with the process. These costs can include appraisal fees, title search fees, and attorney fees, and can add up to thousands of dollars. To avoid these costs, it’s important to carefully consider the benefits of refinancing before proceeding.
Interest is the cost of borrowing money and is the biggest cost associated with a mortgage. Interest is calculated as a percentage of the loan amount and is added to the loan balance each month. The interest rate you pay on your mortgage can vary greatly depending on your credit score, the type of mortgage you choose, and other factors.