The actual money that is used for building or buying a home is not the only cost in home financing. Every home requires certain expenditures for repair and upkeep. In addition there are taxes, insurance, water costs, miscellaneous items and improvements to be considered.
The amount of money for maintenance varies according to the quality of materials and construction and the amount depends also upon the family's inclination to make minor repairs of the house promptly; for if small repairs are neglected they often become large ones very rapidly. No attempt, however, is made even to estimate the proportion of the cost of the house that may be allotted to maintenance. Housing specialists have suggested that in order to avoid a high maintenance cost that it is well when building to eliminate those items, if possible, which need repair frequently. If these items cannot be eliminated, it has been suggested that particular emphasis should be given to them during construction in order to eliminate as much repair as possible.
Dr. John M. Gries and James S. Taylor have discussed briefly in the following paragraphs the usual maintenance costs and such items as property taxes, special assessments, insurance, water taxes or rents, and accessories.
In addition to payments on principal and interest of loans on a home, allowance must be made for some or all of the following expenses: (a) Renewals and repairs, (b) property tax and special assessments, (c) insurance, (d) water tax or rent, (e) accessories, and (f) improvements.
In addition to the above, some home-owners add in the interest which they would otherwise receive on the amount of their cash payment or equity.
In considering annual expenses, maintenance is often neglected by those who buy new homes. The amounts spent will depend largely on the owner's ability and readiness to be his own repairman. After a few years certain parts of the house will need to be repaired or renewed. The outside sash and trim of all houses and the entire exterior of some will need repainting at intervals. This is an expense which many home-buyers do not consider when they buy.
The interior walls will need repapering or repainting every few years.
Those who purchase an old house often fail to consider whether the roof must be renewed. This may cost from $100 to $400.
There are many smaller items of expense which will be called for both in a new house and in an old house. The prospective home-owner should consider these expenses before deciding how much he can pay for the house.
The amount spent for renewals and repairs cannot be determined by any fixed rule. Their cost depends partly on choosing the right workmen, and varies with the quality of construction, the age of the house, and the alertness of the owner in making minor repairs before more costly work is necessary.
A house that is maintained well and kept up to date with modern improvements might not decline appreciably in value over a long period of years while another might become worthless within a short period.
In the purchase of a house it is well to find out the tax rate and the assessed valuation, so that the amount of taxes to be paid each year may be estimated.
If the street is to be paved, or new water, sewer, or gas-mains, or electric light lines are to be put in, there may be special assessments charged against the property. It is well to find out which ones of these must be allowed for.
The rate of fire insurance may depend upon the materials used in building, . the fire protection afforded in construction, and the location of the house, but it is rarely as much as one-half of 1 per cent of the value of the house. Insurance is necessary not only to protect the mortgage holder but also the equity of the owner. It is always required by the bank, trust company, or building association making a loan.
This tax is usually small but should be considered in estimating fixed expenses.
The purchaser of a new house usually finds that he must spend something extra to make the house comfortable. As a rule he must buy screens for all windows and some of the doors. In cold climates he frequently finds it advisable to buy storm-windows and storm-doors, or at least to install weather-stripping. Awnings, as a rule, must be purchased by the owner. Frequently $200 or more must be spent on the house before it is in satisfactory condition.
The owner is likely to make certain improvements and changes that call for expenditures. In a house of low cost many desirable features are omitted, and, as a rule, the family insists on adding some of them. It may be decided, for example, to put in partitions, if none have been installed, separating the coal-bin, the fruit-closet, and the laundry from the rest of the cellar. This may cost from $50 to $150. Other improvements often added are: Sleeping-porch, a screened-in porch, tile in the bathroom, papering other rooms, sodding the yard, and storm-windows or doors.1