Personal Finance

Estimating Home Ownership Costs

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  • Apr 29th, 2014 7:24 am
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[OP]
Deal Addict
Dec 25, 2005
1414 posts
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Estimating Home Ownership Costs

I've been trying to decide whether the time is right for me to buy a home and I wanted to get input from some of the other home owners on this forum. I've been building myself a conservative budget to try and estimate the costs of home ownership. I've seen all of the "rules of thumb", but I'm curious to know what sort of real-life costs others have encountered.

Let's say we're talking about a $325,000 (say 10% down), 1750 sq. ft. single family home; 5-10 years old.

My current budget includes:
Mortgage and property taxes: $1,825 / month (current rates)
Insurance: $100 /month
Maintenance: $6,500 / year
Seasonal maintenance: $500 / quarter
Utilities and gas: $320 / month

Using these numbers, it essentially looks like a money pit (which homes really are... ). Am I missing anything? Am I being too conservative? Not conservative enough?

Thanks!
11 replies
Member
Dec 3, 2008
407 posts
56 upvotes
Hamilton
housing should not cost any more than 35% of your monthly wages. unfortunately most people live above their means and banks are making a fortune giving high risk home buyers (the 10% downpayment type) huge mortgages based on long amortizations and unrealistic actual cost of living . so ya it could be a money pit if you cant do the math. owning a house is like going on a long vacation ,its great for 2 weeks then the excitement wears off as time goes by and you cant wait to leave.
kevv
Deal Expert
Mar 23, 2009
17256 posts
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Toronto
You've budgeted 2% of purchase price per year for maintenance, with seasonal maintenance on top of that. Overall that seems quite high.

That rule of thumb is 1-2%, with many advocating 1% for a recent home in good condition, so that range is $3250 to your $6500. Another rule of thumb is $1-2 per square foot, which works out to $1750-3500.

Just guessing, I'd say $4000 including seasonal maintenance (if you do the seasonal maintenance yourself). For me it's quite a bit higher, but then again I have a much bigger house and I also have a huge yard and garden and periodically hire a gardner to help out.
kevv wrote:
Apr 27th, 2014 9:26 am
owning a house is like going on a long vacation ,its great for 2 weeks then the excitement wears off as time goes by and you cant wait to leave.
? I love living in my house, and hope to stay here at least until retirement.

However, I would strongly consider downsizing after the kids move out, to live out much of my retirement in a condo. but my wife wants to stay in this house through retirement. IOW, while I love this house, my wife loves it even more.
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Sep 5, 2005
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are you trying to justify whether or not to rent vs buy? your numbers are extreme on the high side.

Essentially, it's cheaper than rent in most cases, if you don't do any upkeep as you don't normally do maintenance in rentals. You want it to look nice, there is a price to pay.
Deal Expert
Mar 23, 2009
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Hot Ice wrote:
Apr 27th, 2014 9:37 am
are you trying to justify whether or not to rent vs buy? your numbers are extreme on the high side.

Essentially, it's cheaper than rent in most cases, if you don't do any upkeep as you don't normally do maintenance in rentals. You want it to look nice, there is a price to pay.
I find most people buying a house spend MORE on their house's monthly costs than rent (if you include the mortgage costs), partially because they get a bigger house than they would rent otherwise. So, it often becomes very difficult to compare. For most people it's an apples to oranges comparison. What makes it even more different to compare is the time factor. In a rental you just pay your rent. In a house, you may spend time trying to fix things yourself, or work the yard yourself. Indeed, I've learned how to do things like drywall and wire electrical fixtures, and I cut, fertilize, and seed my own lawn. So, it doesn't cost me much in $, but it costs me in time.

Furthermore, I'd never bother reno'ing a rental of course.
Deal Fanatic
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Apr 11, 2008
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Don't buy a primary residence to save money, buy a house when you can afford it and has a need for it. If you compare car ownership cost to walking, cars rarely win, yet people still own cars.
Deal Fanatic
Dec 5, 2009
5290 posts
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Your costs are high.

Also when looking at various "rules of thumb" the ones based on percentage are going to be inaccurate due to how hot the housing market is. Many houses have doubled in value over the past several years. Does that mean the maintenance costs have doubled? No.

$ per as foot would be better (eg $1 per sq ft per year).

There are also some great resources online that eatimatr the lifespan of every component of a house.
Moderator
May 28, 2012
10368 posts
2491 upvotes
Saskatoon
Which area are you in? Where can you find that size of house for $325K? Imo, your maintenance costs seem high - there would be random years when you are replacing something big but for the most part, you wouldn't be spending that much unless it was for home improvements (or you bought a fixer upper).
Deal Expert
Mar 23, 2009
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Toronto
fdl wrote:
Apr 27th, 2014 10:29 am
Your costs are high.

Also when looking at various "rules of thumb" the ones based on percentage are going to be inaccurate due to how hot the housing market is. Many houses have doubled in value over the past several years. Does that mean the maintenance costs have doubled? No.

$ per as foot would be better (eg $1 per sq ft per year).

There are also some great resources online that eatimatr the lifespan of every component of a house.
I'd say $1 per square foot per year is probably too low, unless he does much of the work himself. It's possible $1 per square foot is feasible, but it's not appropriate for a conservative budget. OTOH, his 2% number is too high. With that and his additional $500 seasonal, that's $7000 per year, or $4 per square foot.

That's why I suggested perhaps $2 per square foot, plus that extra seasonal, which works out to 2 and a quarter bux per square foot per year. That might also be slightly high, and is totally a guess, but I think it's a reasonable guess for a conservative budget.

To put it in real terms:

On one side of my yard, we just put in a new fence with a couple of gates, etc. Cost is many, many thousands, split between the two households.
On the other side of my yard, we have been periodically been fixing the fence ourselves. Cost is maybe $100-150 every several years, split between the two homes.

The first example of the professional fence replacement looks better, and is sturdier, but the DIY fix in the second example does the job. I'd be happy to replace the fence on the second side as well, but my neighbour didn't want to do it just yet because he allocated the money other renos, which is fine by me too.

So as these examples illustrate, there is some flexibility in it as well.
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Sep 5, 2005
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EugW wrote:
Apr 27th, 2014 9:43 am
I find most people buying a house spend MORE on their house's monthly costs than rent (if you include the mortgage costs), partially because they get a bigger house than they would rent otherwise. So, it often becomes very difficult to compare. For most people it's an apples to oranges comparison. What makes it even more different to compare is the time factor. In a rental you just pay your rent. In a house, you may spend time trying to fix things yourself, or work the yard yourself. Indeed, I've learned how to do things like drywall and wire electrical fixtures, and I cut, fertilize, and seed my own lawn. So, it doesn't cost me much in $, but it costs me in time.

Furthermore, I'd never bother reno'ing a rental of course.
They do spend more, but that doesn't count as maintenance. It's actually improvements. As I said, you want it to look nice, you pay, either do it yourself or pay someone to do it. As you said, you'd never bother reno'ing a rental, but you would if you own it. Call it pride of ownership :lol:
[OP]
Deal Addict
Dec 25, 2005
1414 posts
429 upvotes
Thanks for the comments, all. Mars, this house is in Southwestern Ontario, away from the GTA. Hence the more reasonable prices.
Deal Expert
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Dec 11, 2005
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Never mind you seem to have plenty budgeted now that I see your other $6K in there. You are not going to spend $6K / year in maintenance. But you need this in a fund somewhere.

--

There will be things you want to fix up and make better. There will be things that break and need fixing whether you planned for it or not. In the summer there is gas for the lawn mower, BUYING and maintaining a lawn mower, various pesticide spot treatments, soap for cleaning, etc. In the winter there is gas for the snowblower, BUYING and maintaining a snowblower, salt, sand, shovels that break and need replacement, etc.

One random plumbing leak in your kitchen while you are not home can easily mean thousands of dollars in repairs. You need to be prepared for this if you own a home and build a fund for such things, or have access to this money somehow.
To be nobody but yourself - in a world which is doing its best, night and day, to make you everybody else - means to fight the hardest battle which any human being can fight; and never stop fighting. -- E. E. Cummings

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