New Homeowners Spend the Most Money on These Things in the First Year of Homeownership
Buying a new home is a great feeling, but it can cause financial strain. A survey conducted by HomeAdvisor found new homeowners spend a lot more than they anticipate during the first year. How can you make sure you don’t break the bank after buying your dream home?
The Cheat Sheet spoke with Dan DiClerico, HomeAdvisor’s home expert, to learn more about the study and get tips on how to reduce costs. Here’s a peek into our conversation.
- DIY when you can.
- Set aside an emergency fund that’s between 2% and 5% of the purchase price of the property.
- Don’t buy more house than you can afford.
The Cheat Sheet: What surprised you most about the survey results?
Dan DiClerico: I’ve always known how harmful water can be to a home, but I couldn’t believe just how large it loomed in the survey results. From leaky roofs to clogged drains to overflowing toilets, water causes so many headaches for new homeowners. And if left unchecked, the resulting repair costs can be backbreaking.
The takeaway for buyers is that it’s critical to pay close attention to potential water problems before closing on the house. A qualified home inspector should be able to spot major issues. Don’t be shy about asking to tag along during the inspection. Besides ensuring an A+ inspection, this is a great way to learn the ins and outs of the home before you take over as the owner.
CS: What are new homebuyers spending the most money on during the first year of homeownership?
DD: Emergency repairs can’t wait, so first-year expenses tend to be focused on these kinds of projects—patching or replacing a leaky roof, fixing gutters and downspouts, getting the heating and cooling equipment in working order, and so on.
If there’s money left over after all that, new homeowners tend to focus on home improvement projects with maximum bang for the buck. Interior painting is the best place to start. It’s the fastest, most cost-effective way to personalize the home.
A lot of new homeowners also choose to upgrade their appliances. This helps give the kitchen a new look and feel, while improving its overall functionality. Plus, a lot of people are skeeved out by taking over someone else’s refrigerator!
CS: How can homebuyers lower costs during the first year?
DD: A little sweat equity goes a long way, especially during the first year of homeownership, when money is tight. Painting is always one of the best DIY projects. Paying a professional costs an average of $1,749, according to HomeAdvisor’s True Cost Guide. Homeowners can do the work themselves for a couple hundred bucks.
Lawn care is another great place to save. Depending on the length of the growing season, a homeowner can save anywhere from $800 to $1,200 by mowing the lawn themselves, as opposed to paying a lawn service.
CS: Are there any programs available that could provide financial assistance for first-time homeowners to cover costs such as financial emergencies and renovations?
DD: Unfortunately, there aren’t a lot of great options out there, which is why it’s so important not to spend every last penny on the new home. Ideally, you want to be left with an emergency fund that’s between 2% and 5% of the purchase price of the property.
In other words, if you paid $300,000 for the house, plan to have between $6,000 and $15,000 in the bank after the closing. If you did this and the maintenance costs are still more than you can handle, you might open a zero-balance card which will at least give you time to catch your breath before the interest starts to pile up.
CS: Anything to add?
DD: These survey results definitely offer a cautionary tale for new homeowners. However, they shouldn’t take away from the incredible pride of achieving homeownership. You did it! Be happy! Just realize that you’ll need to be smart with your finances, especially during the crucial first year, to make sure your home remains a source of joy and not a cause for regret.
Check out The Cheat Sheet on Facebook!