Everyone knows that a home can be a financial sinkhole if you’re not careful. Some people buy the property with all sorts of assumptions or sign on the dotted line too quickly and end up paying more than they can afford. Here are a few of the most common ways you can end up losing money.
Assuming It Will Appreciate In Value
Find out if the low cost of the property is because of its location rather than the condition that it’s in. Be sure that you can afford to make the improvements needed to raise its value. Budget carefully to ensure that you won’t be in trouble if it doesn’t work out. The housing market is always risky to bet on, as the last several years have shown. It’s hot right now, but will that last?
Not Finding The Right Home Loan
Calculate repayment costs and fees to make sure that you can afford your home loan and avoid foreclosure. If your financial situation improves, then you can refinance the loan to shorten the repayment schedule or change the interest rates. For example, veterans may be eligible for an IRRRL, or Interest Rate Reduction Refinancing Loan.
Bad Budgeting
Create a worst-case scenario spreadsheet to plan for potential damage to your home. From needing to replace a broken boiler to dealing with a flooding situation from burst pipes or bad weather, damage costs can be huge. A failure to budget properly can result in you struggling to make your loan repayments.
Underestimating Renovation Costs
Hire a contractor to conduct a thorough survey before you buy a new home. Find out whether it’s going to be a question of repainting or a top-to-bottom renovation that includes walls, wiring and water. Don’t assume that you are going to be able to do everything yourself. Find out how much each potential fix will cost you before you sign on the dotted line.
Not Anticipating The Weather
Talk to friends and family who have bought a property in the region before to properly educate yourself on all the potential costs. Check to see if your home is properly insulated to save on energy bills. Research any extreme weather conditions for your region through the year and see if your house is properly equipped to withstand it. Missouri locals, for example, will know that they need to be ready for those big storms. The more you can educate yourself beforehand, the better prepared you will offset any unexpected costs.
