Buying a home is an exciting step, but it can come with surprise costs that cannot always be predicted. These unexpected expenses can catch you off guard and affect your budget. In this article, we’ll talk about the top surprise costs you might face when buying a home, so you can be better prepared.
Closing costs
Closing costs are extra fees you pay when finalising the purchase of a home, on top of the home’s price. These fees cover the different steps needed to officially transfer the property from the seller to you. The exact amount can vary depending on where you live, the type of loan you have, and other factors. Here’s a simple breakdown of what these costs typically include.
Title insurance
Title insurance helps protect both the buyer and the lender from losing money if there are problems with the property’s title, like unpaid taxes or mistakes in the records. Here’s a quick look at the two types:
- Owner’s title insurance: Safeguards the buyer’s ownership rights.
- Lender’s title insurance: Protects the lender’s financial stake in the property.
Appraisal fee
The appraisal fee is paid to find out the property’s true market value, making sure it’s worth enough to back up the loan. This fee covers the cost of the appraiser’s visit and the report they create.
Loan origination fee
The loan origination fee is what you pay the lender for handling your loan application, reviewing your financial details, and finalising the loan. It’s usually a small percentage of the loan amount or sometimes a set fee.
Property taxes
Property taxes are used to support local services like schools, fire departments, and road maintenance. When you close on a home, you may need to pay a portion of the year’s property taxes upfront, even though you’ll get a tax bill later on.
Homeowners insurance
Homeowners insurance helps protect your property from damage due to things like fire, theft, or bad weather. You usually have to pay the first insurance premium when you close on the home, and then make regular payments afterward.
Other
- Attorney fees: Payment for a lawyer to review the closing paperwork.
- Credit report fee: Charged to check your credit score and history.
- Recording fees: Cost to officially register the deed and mortgage with the local government.
- Transfer taxes: A tax charged by the state or local government when the property changes hands.
- Prepaid interest: Interest on your loan that covers the period from closing to the end of the month.
- Homeowners Association (HOA) fees: If relevant, the first HOA fee might be required when you close the deal.
Home inspection and repairs
A home inspection is an important part of buying a house, but it can reveal unexpected costs. Although a professional inspector will carefully check the property for any problems, it’s the repair costs that can really affect your budget.
Common repair issues
- Structural problems: Fixing issues like cracks in the foundation, leaks in the roof, or rotting wood can be expensive.
- Plumbing issues: Leaky pipes, blocked drains, or broken water heaters need quick repairs.
- Electrical problems: Problems like bad wiring, old electrical panels, or not enough outlets can be dangerous.
- HVAC problems: Broken or inefficient heating and cooling systems can lead to high energy costs and make your home uncomfortable.
- Pest infestations: Termites, rats, or other pests can cause serious damage if not addressed.
- Outdated systems: Old appliances, roofs, or windows may need to be replaced.
Moving costs
Moving to a new home is both exciting and stressful. A big part of the process is handling the costs of moving your stuff.
Hiring professional movers
- Distance: Moving within the same city usually costs less than moving to a different city or state.
- Volume of goods: The more items you have to move, the higher the cost.
- Type of service: Movers who handle everything (packing, loading, transporting, unloading, unpacking) are more expensive than those who just move your things.
- Additional services: Extra services like transporting your car, insurance, or storage can add to the total cost.
Cost of hiring professional movers
Here’s a simple breakdown of moving costs based on the size of the home:
| Home size | Labour cost | Packing material | Transportation |
| 1 BHK | ₹700-1,000 (2 men) | ₹1,200-4,000 | ₹2,000-8,000 |
| 2 BHK | ₹1,200-2,000 (4 men) | ₹1,500-4,500 | ₹5,000-12,000 |
| 3 BHK | ₹2,000-3,000 (6 men) | ₹3,000-5,500 | ₹7,500-14,000 |
| 4 BHK | ₹3,000-4,000 (8 men) | ₹4,000-8,500 | ₹10,500-19,000 |
| Villa | ₹3,500-8,000 (8-10 men) | ₹5,500-10,000 | ₹11,500-23,000 |
Home improvement costs
Updating appliances
Old appliances can use more energy, break down often, and look outdated. When replacing them, there are some good options to consider:
For refrigerators, choose energy-efficient models that may have features like water dispensers and ice makers. When picking ovens and stoves, decide between gas or electric based on how you like to cook. For dishwashers, find ones that are quiet, save energy, and offer different wash settings. Washing machines and dryers that are energy-efficient and have technology to adjust loads can help save money. Microwaves come in over-the-range or countertop styles with various cooking functions. The cost of replacing these appliances can vary a lot depending on the brand, model, and features you choose.
Landscaping
Taking care of your landscape can greatly boost your home’s appearance, create enjoyable outdoor spaces, and increase its value. For maintaining your yard, keep up with regular mowing, fertilising, and controlling weeds. Add visual interest with a variety of plants like trees, shrubs, flowers, and ground cover. Consider adding hardscaping elements such as patios, walkways, retaining walls, and outdoor lighting. If you want to add a relaxing touch, think about including water features like ponds, fountains, or waterfalls. The cost of landscaping varies widely, depending on whether you handle it yourself or hire professionals.
Interior renovations
Updating the inside of your home can make it more functional, stylish, and increase its value. For a fresh look, repainting walls can make a big difference. When it comes to flooring, you have choices like hardwood, tile, laminate, or carpet. Updating the kitchen might involve new cabinets, countertops, appliances, and fixtures. In the bathroom, you can replace vanities, sinks, toilets, showers, and tubs for a modern touch. Finishing a basement can turn unused space into a new living area, office, or entertainment room. The cost of these updates can vary a lot depending on how big the project is and the materials you choose.
Homeowners association (HOA) fees
Homeowners’ Associations (HOAs) in India play a key role in managing residential communities, maintaining common areas, and boosting property values. They became popular as urban and gated communities started to grow, thanks to planned residential projects. HOAs help keep communities well-maintained and ensure a good quality of life by enforcing rules and regulations set by the homeowners.
To start an HOA, you need to create governing documents, register the association, and choose a board of directors. Registration requirements can vary by state. HOA members are responsible for paying fees, which cover community management costs, participating in decision-making, and following the association’s rules.
HOA fees usually range from ₹2,000 to ₹30,000 per month, depending on the type of property, amenities, and services. These fees help with maintenance, saving for future needs, and improving the community. The board of directors manages the HOA’s operations, including budgeting, collecting fees, and enforcing rules.
If you’re part of an HOA, it’s important to stay informed about your responsibilities and be involved in community activities.
FAQs
In some cases, you might be able to negotiate certain closing costs with the seller.
Closing costs typically range from 2% to 5% of the loan amount.
It's advisable to purchase insurance to protect your belongings from damage or loss.
Building an emergency fund and considering homeowners insurance can help prepare for unexpected costs.
Aim to save at least 1-2% of your home's value annually for unexpected repairs.
Home warranties can provide coverage for appliances and systems, but it's essential to compare costs and coverage options. Can closing costs be negotiated?
How much should I expect to pay in closing costs?
Do I need to purchase insurance for my belongings during the move?
How can I prepare for unexpected homeownership expenses?
How much should I save for home maintenance and repairs?
Should I consider a home warranty?
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
