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The true cost of home ownership

If you’re thinking about swapping your monthly rent payment for a mortgage, you may already have a location and price range in mind that fit your budget. But the costs of owning a home go beyond the monthly payment. Before you buy, it’s important to understand all the expenses related to home ownership — from initial costs, to ongoing expenses, to the unexpected. Keep these factors in mind to help you estimate the true cost of owning a home — and to help you develop a realistic housing budget you can live with.

Mortgage and more: A list of costs to consider
While home ownership is a big financial commitment, it’s also an investment that comes with many benefits. You can decorate and modify your house as you please, and you’re building equity, which can be a valuable financial asset. If you’re thinking about purchasing a home, here are some initial and ongoing costs to be aware of.

One-time costs
  • A down payment, which can range anywhere from as little as zero money down to 20 percent of the home price.
  • Closing costs, such as appraisals, inspections and other services performed by your lender
  • Borrowers will be required to make an upfront payment of 14 months of homeowners insurance as well as a certain amount of months of property taxes to fund their escrow account
  • Discount points, an optional charge that lets you reduce the interest rate on your mortgage
  • Moving expenses, such as a moving service and storage unit
  • Furniture, appliances and household tools, which can vary depending on what you already own and what the previous homeowner leaves behind
Ongoing costs
In addition to your monthly mortgage payment, plan for these ongoing expenses:
  • Homeowners insurance
  • Private mortgage insurance (often required if your down payment is less than 20 percent)
  • Property taxes
  • Utility costs that may be higher than when you were renting
  • Home maintenance and repairs
  • Yard care
  • Additional home-related costs depending on where you live, such as homeowners association (HOA) fees and pest control services
Move closer to your goal of home ownership
Saving enough for a down payment can be one of the biggest hurdles for first-time homebuyers. Try the ideas below, keeping in mind that the more money you can put down upfront, the less you’ll need to borrow to buy your home — which can translate to lower mortgage payments and savings on interest charges over the life of your loan.
  • Put any extra funds — such as bonuses, tax refunds or rebates — toward your down payment
  • Look for ways to cut down on everyday expenses — for instance, eat out less and trim utility costs
  • Sell items you no longer use or need at local consignment shops or on online marketplaces such as eBay
  • Work extra hours and put the extra income toward your down payment
In addition, having a budget in place can give you a clear picture of where your money goes each month — and can also help you determine how much you can afford to spend each month as a homeowner.

Consider setting up an emergency fund to help cover unexpected costs like a furnace repair, broken window or a leaky roof. This can help you avoid using credit cards or long-term savings to cover home repairs. Commerce Bank’s myRewards Savings and money market accounts provide convenient options for saving.

A home will likely be the largest purchase you’ll ever make. But your home can also be your greatest asset, and the money you put into your home can help maintain and increase its value over time. Commerce has mortgage specialists at the ready to help you set a plan, find something that works for you, and stick with you every step of the way. To learn more about mortgage options and the homebuying process, contact our Mortgage Team or stop by your nearest Commerce Bank branch.

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