IMPORTANT DISCLOSURE INFORMATION
The following presentation by New England Capital Financial Advisors, LLC (“NECFA”) is intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from NECFA or any other investment professional of your choosing. Please see additional important disclosure at the end of this penetration. A copy of NECFA’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.newenglandcapital.com.
The True Cost of Buying a House
Hey everyone, I’m Liam Wallace with New England Capital. If you’re thinking about buying a home—or even just dreaming about it—it’s easy to focus on the sale price. But the truth is, the price tag is just the beginning. Today, we’re breaking down all the real costs of buying and owning a home so you’re not blindsided later on.
Let’s start with what most people think of first: your mortgage payment. This has two parts - principal and interest.
Principal is the portion that goes toward paying down the loan itself.
Interest is what the bank charges you to borrow that money.
If you take out a $400,000 mortgage with a 7% interest rate over 30 years, your monthly payment would be almost $2,700 and you’ll end up paying nearly $960,000 in total when it’s all said and done. That’s the cost of borrowing.
In the first year of your mortgage, you would pay nearly $28,000 in interest, while only paying about $4,000 in principal.
Next up, Property Taxes. These are ongoing, and they’re based on the value of your home and the tax rate in your area. Some states or counties have low rates, others—not so much. For example, a $500,000 home might cost you anywhere from $2,000 to $10,000 a year in property taxes depending on location. If your property taxes were $7,000 a year, this would add $625 per month to your payment which would bring your monthly payment up to about $3,300 per month.
These are usually rolled into your monthly mortgage payment through your escrow account, so you may not even realize how much you’re paying unless you look.
Let’s talk about Homeowner’s Insurance. This protects you financially if something happens to your home—like a fire, burglary, or natural disaster. The cost depends on location, size of your home, deductible, and what’s covered.
It could range from $800 to $6,000 per year, or more in high-risk areas like hurricane zones.
These are also typically rolled into your monthly payment through your escrow account. At $2,400 a year or $200 per month, now your housing payment would get close to $3,500 per month.
If you’re putting down less than 20%, you’ll likely have to pay PMI, or Private Mortgage Insurance. This protects the lender—not you—if you default. It typically costs between 0.5% to 1.5% of your loan amount per year.
On a $400,000 loan, that could be $2,000 to $6,000 annually—just for PMI.
Now for something a lot of new homeowners underestimate: maintenance and repairs. Things break. Lawns grow. Furnaces die—often in January.
As a rule of thumb, Budget 1% to 3% of your home’s value per year for maintenance. So, for a $500,000 home, that’s $5,000 to $15,000 a year.
Don’t forget the one-time upfront costs at purchase, like:
- Closing costs which could be 2-5% of the purchase price
- Home inspection and appraisal
- Moving expenses
- Furniture and upgrades
On a $500K home, closing costs alone could be $10K–$25K.
So, as you can see, buying a home is more than just the sticker price. From mortgage interest to maintenance surprises, it pays to plan ahead. The good news? If you’re informed, you can budget smart and avoid getting in over your head.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by New England Capital Financial Advisors, LLC [“NECFA”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from NECFA. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. NECFA is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the NECFA’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.newenglandcapital.com. Please Note: NECFA does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to NECFA’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a NECFA client, please contact NECFA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account stateme