Home ownership can be a fantastic thing. However, owning a home can be more expensive than meets the eye. It’s a situation that new homeowners figure out after a few years, and prospective homeowners often don’t fully realize when planning a purchase. However, it pays to be prepared, and to think about what’s involved.
This is a topic that I first brought up in May of 2010, back when Squirrelers was in it’s first few months and just starting to pick up some readers. The post was titled The True Long-Term Costs of Home Ownership, and explored the subject in some detail. You can click the preceding link to read it in full.
Within the post, I spelled out 5 ways home ownership generates increased costs vs renting:
- Association Fees (typically with attached housing)
A year later, as we’ve seen continued softening of real estate prices in many areas, I revisited the post, and still find each area to be important to think about when making a home purchase.
That said, one area jumped out at me a little bit more: Taxes.
With declining home values, people may be paying less for their homes in terms of principal and interest. Not that debt is a good thing, but for better or worse many people will borrow money to buy a home. Lower prices just might mean a lower payment, if you’re focusing on house rather than payment. Sounds great, right?
Well, maybe. Part of housing costs may be declining, but are real estate taxes going down? Probably not. So, as a percentage of home payments, real estate taxes just might be increasing.
The big takeaway with real estate taxes – and I find it to be more true than ever – is that they’re a great example of why you never really own your home free and clear.
Sure, if you have no mortgage, it might mean that you paid off a loan or perhaps paid all in cash if lucky enough. That’s all fine and great. However, what happens if you decide not to pay your real estate taxes? The concept of ‘ownership’ changes pretty quickly, and you’ll realize just how much you really ‘own’ your house when taking that course of action.
It seems like it might be a buyer’s market for the short-term, and home ownership is something that’s a great thing in many ways anyway. So, this post is not about casting doubt over owning a home.
Having said that, just keep in mind that real estate taxes are like a mortgage payment that never goes away. Rather, it tends to increase over time. So, when buying a home, consider holistically the concept of ‘ownership’ and the actual costs involved, regardless of category or classification.
Have you paid close attention to real estate taxes when home shopping? Are taxes reasonable where you live, or borderline intolerable?