Last Updated on November 16, 2022 by Luke Feldbrugge
A new home budget can be sobering. You’re in your new house, you went through all the financial anxiety of getting approved for a loan, making offers, making counter-offers and sitting through the final closing. Now that you’ve got your new home, the reality of creating a new monthly household budget is setting in. Don’t panic. You certainly have some new expenses, and if this is your first home, a lot of expenses will be totally new. Don’t let them intimidate you. We can help.
At Homes for Heroes, new house expenses is something we can assist with as you begin living in your new home. When you work with our local specialists we help you through every step of the home buying, selling and refinancing process. Then at the end of the process, after your closing, you get a Hero Rewards check. The average Hero Rewards savings received per home closing is $3,000. That’s our organization’s way of thanking you for your service. Our community heroes use their savings for all kinds of new home expenses – renovations, new appliances, new furniture and more.
“It was an awesome experience for us and the money we got back from Homes for Heroes definitely helped. We got money back for selling and buying a home and it helped pay for new appliances and moving expenses.” – Ryan, Air Force, bought and sold a home in Arizona.
When it comes to ongoing costs in your new home budget, there are monthly expenses and then there are one-time expenses (like needing new gutters). Let’s start with monthly expenses.
New Home Budget with Mortgage: Expense and Investment
Your monthly mortgage payment is typically going to be your biggest expense. If this is a second or third home, you are probably used to this monthly expense, but if you are a first-time homebuyer, it might come as a shock. With any luck, your loan officer and your real estate agent prepared you for this, so that might help. The difference between knowing what you will owe each month and actually paying it can be intimidating.
Of course, the current rent environment could be making your transition to mortgage payments much easier to stomach. The trajectory of rent in today’s market may be what tipped you into the “buying a house” column in the first place.
If you look at your mortgage payment as purely an expense, you may be missing out. It’s more than that. You are paying into a pool of equity that you own, so in some ways, you are paying yourself. Building the equity of your home and property is also an investment in your own wealth, and that equity grows with each payment and as your property becomes more valuable in the market. The prediction is that the equity of the average home value will continue to increase long term (but much slower than the last three years) and that also increases your equity.
Escrow: Bundling Some New Home Expenses
Housing expenses can come hard and fast when you are in your new house, so your mortgage specialist may recommend you set up an escrow account. The escrow account is attached to your mortgage payment, so it’s all rolled into one. If you escrow your expenses – typically your homeowners insurance and your property taxes – it means that they add those monthly payments to your mortgage payment and you pay it all at once.
There are some upsides and downsides to escrowing your monthly mortgage payment, and you should discuss them with your lending officer or mortgage broker.
New Home Budget: Insurance
Homeowners insurance is a monthly expense, much like your auto insurance, and mortgage lenders require it. First time home buyers probably haven’t paid it before, but you probably understand what it does and why it’s necessary. It’s a significant expense over the course of a year, so it’s a good idea to shop around for it. If you bundle it with your auto insurance, you can often get a significant discount.
Home insurance won’t cover all damage to your house, but it typically covers:
- Your primary dwelling and any outbuildings on your lot
- Liability for personal or medical issues
- Fire and/or smoke damage
- Damaging weather such as storms, lightning and hail
- Theft and vandalism
- Falling trees
It typically won’t cover:
- Flooding or earthquakes
- Pest damage (termites)
- Jewelry or artwork
- Any damage caused by neglect or normal wear and tear
In some of these cases, you can buy extra coverage that will protect your home from specific damages.
New Home Budget: Property Taxes
If you’ve been renting, you have probably paid property taxes, but they were rolled up into your rent payment so you didn’t notice it. You will notice your property taxes, and they will take a monthly bite out of your house budget. As we mentioned, you can hide them in your escrow payment. In some states, you can file for a property taxes refund, which is a lot like your April 15 tax refund, if you homestead your house.
If you are wondering what your property taxes pay for, here’s a partial list:
- Public schools
- Law enforcement
- Road maintenance
- Fire departments
- Social Services
Utility Costs, Old and New
Again, if you’re a first time home buyer, many of these monthly bills may have been wrapped up in your rent check. Now you will be paying separately for water, sewer, electricity, trash collection and natural gas (depending on how you heat). Those were considered the old school necessities of keeping your house running. The new necessities in your new home budget may include your cable bill or your internet service – or both. As you are coming up with your new monthly budget, add these to the monthly house expenses column.
Homeowners Association Fees
Buying a condominium presents its own advantages in terms of maintenance, but there are usually homeowners association (HOA) fees that will need to be paid. Make sure you are clear about what these are before you move in, because some of these fees can be very high.
There are only a few maintenance items that will be regular expenses. Lawn care is one of them if you hire that done by a law service. Other maintenance items are simply checking different parts of the house – for example, the furnace filter – and they simply take time but not much money. Of course, in the long run, older homes have more regular maintenance issues than a new build.
Most ongoing maintenance checklists come in two flavors: one for Fall and one for Spring:
One-and-Done Budget Items
Some new house expenses happen every month, but some of the more fun expenses are just one-offs that you need to save for. Did we say fun expenses? How about…
The difference between needing new appliances and wanting new appliances is significant. If you must get new appliances, it’s often because something broke or one of the machines is just too old. You should know this up front, after the inspection, and before you close on the house. There are always surprises, but you should be somewhat informed about the lifespan of the appliances in your new home.
If your budget allows for upgrading the appliances in your house, that can be fun. That’s one of the favorite uses of the Hero Rewards checks we give to our community heroes after closing. If new appliances are on your agenda, but not affordable when you move in, build some savings into your discretionary spending to upgrade in the future.
New Furniture and Décor
Another fun expense can be furniture for the new house. A new house gives you the opportunity to decorate and furnish your new life the way you want to. Maybe that’s as simple as a new couch, a new rug or a new bed. This might be an opportunity to also leave behind some of the old furnishings that are way past their due date. As with appliances, you might want to build some savings into your monthly budget for future upgrades of your furniture.
Jumping into renovations at the same time you are moving into your house is not for the faint of heart. In life, some things are messy and some things are expensive – renovations are both. If you are moving in at the same time that renovations are happening, it can disrupt your life a lot. There’s a “settled in” feeling you get once you move into a new place, and you may not feel that if walls are being torn down or tile is being installed. If you can do the renovations before move-in day, that’s ideal. But that doesn’t happen too often.
The expense of a renovation project can be much higher than either appliances or furniture, so budget accordingly. If you choose to do it yourself, it will likely be cheaper but will probably take more time.
Some renovations aren’t fun or voluntary: they are fixes you need to make to the house to make it livable. These are functional, structural things like wiring, plumbing, roofing, HVAC systems, high radon levels, etc. that you must improve or fix before you can move in. Again, the home inspector should have found these and reported them to you. During negotiations with the seller, with the help of your real estate agent, you probably worked out how to pay for these fixes.
Other fixes come up after time, and you may need to budget for them. Some will be unexpected expenses but others can be anticipated, e.g. a 24-year-old roof. The home repairs you can’t anticipate will probably be somewhat urgent and may come out of your checking or savings account (or a credit card). It’s hard to budget for them, unless you have an emergency fund specifically set up.
New homeowners with the ability to do so should consider setting aside some money each month into a fund specifically for any unforeseen home expenses that may come up.
Homes for Heroes Helps the New Home Budget
In terms of new home budgets, we want to start you off on the right foot. Homes for Heroes provides a lot of help during the home purchase process, but the thank you check after closing is probably the most appreciated. The average Hero Rewards check is $3,000, and that helps our heroes with any number of expenses that accompany a new home – fun expenses and necessary expenses.
Be sure to tell the heroes in your life – both current and former teachers and educators, medical healthcare professionals, active military service members, military reserves and veterans, firefighters (full time and volunteer), EMS (paramedics and EMTs) and law enforcement – if they are thinking about entering the housing market or refinancing their mortgage to sign up with Homes for Heroes to speak with our local specialists so they can find out how they can save significant money.