The Real Cost of Buying A Bigger Houseby Anastasia Ivanov
Finding the perfect home can take a toll on your mind, body and finances, especially for those who do not understand the market or the hidden costs of real estate. Realtors sometimes feed clients the line of buying a big home, so that they can grow into it with their families. Yet for some reason, large families often try to move into smaller homes.
Why does that happen? Most likely because they have discovered the true cost of buying and maintaining a large house. InvestmentZen put together this infographic to point out some of the major costs to consider before when buying a bigger home.
The average house price in the U.S has a tag of $84 per square foot. For every 500 ft of house that’s $42,000. But this does not include all the other hidden costs that come along with buying more space.
You will also need to pay the agent a closing fee of 3.5%. Then you have to furnish the house, which can cost 20% of your home price (obviously this percentage might be lower if you live in a higher priced neighborhood). Your property tax kicks in at 1.31% on average, annual maintenance fees average 1% of the home price, and you’ll pay another $1.03/sq ft for energy. Assuming you take out a 30-year mortgage at 4%, you will end up paying a whooping $120,574 for every additional 500 sq ft of space.
Before going for that extra space, it’s also important to understand how these extra costs can affect your long-term financial planning. If you don’t already know how this decision will affect your retirement path, the right time to run those numbers is before you make the purchase, not after. Buying a home can be an exciting time, but it can also become a major financial strain if you don’t properly run your numbers. And of course, it couldn’t hurt to have a good budget in place so you truly understand your cash flow situation.
Hopefully these numbers don’t discourage you from buying a home you’ll love. The key is understanding the true underlying costs so you can prioritize what really matters to you and better prepare yourself to make the right decision for you and your family.