Financials

The Hidden Costs Of Buying And Selling Your Home

Amanda SchillerTuesday 14 September 2021

Buying and selling your home can be one of the most exciting times of your life. This is because buying your first home signals the start of a new life and is usually accompanied by a family. On the other hand, selling your home means that you’re about to move somewhere new, get a change of scenery, and start a new life.

Although buying and selling a home is definitely an exciting time, it can also be a very costly experience. This is because there are plenty of costs that you’ll have to pay for, on top of paying for the home itself.

Let’s take a look at a few of the hidden costs of buying and selling your home. 

Costs associated with buying a home

The most obvious expense associated with buying a home is the cost of the home itself. In the United States, this will cost homeowners an average of $374,900. However, this cost can very greatly depending on the size of the house and the market where you buy it.

Usually, this purchase is financed by getting a loan from a bank, paying a down payment, and then paying off the mortgage over the span of 15-30 years. Here’s a breakdown of just how much you can expect to pay when you’re buying a home:

  • Down payment – This is the amount that you will have to pay in order to secure a loan from a bank and is usually anywhere from 5-20% of the house cost. Assuming that you had to put down 5% on an average home, this will cost you about $18,745. If you have poor credit then this number could be much higher.
  • Closing Costs – These can be anywhere from 2-5% of the home’s value and are usually split between the buyer and the seller. This includes things like home inspections, the appraisal fee, the cost of a title search and insurance, and a loan origination fee.
  • Reserves – When a bank gives you a loan, they’ll want to make sure that you aren’t entirely depleting your savings account (so that you can meet your mortgage payment next month). Due to this, they’ll want to make sure that you have some cash leftover in your account called reserves. This isn’t necessarily a fee you need to pay but instead is just cash that you need to have on hand.

As you can see, there’s plenty of expenses to be prepared for before buying your own home. Additionally, the above list only covers the costs of actually buying the home. Once you’ve actually completed the deal and bought the home you’ll be warmly greeted by another round of expenses.

A few of the expenses that you can expect as a homeowner are mortgage payments, the interest that you need to pay your bank for the loan, property taxes, mortgage insurance, homeowners insurance, HOA fees, utilities, and the cost of home maintenance.

Now, let’s assume that you’ve lived in your home for a few years and are ready to sell. Here are a few of the costs associate with selling your home.

Costs associated with selling a home

When the time has come to sell your home, the good news is that you can expect a large windfall of cash since your home has (hopefully) appreciated in value over time. However, a small chunk of this sale will go towards paying certain fees.

Here are the biggest fees that you’ll have to pay when you sell your home:

  • Broker fee – To sell your home, you’ll usually have to hire a real estate agent to list your home and show it to potential buyers. This is most likely the biggest fee that you’ll have to pay as the seller and usually comes out to about 5-6% of the sale price. This means if your house costs $374,900 then you’ll have to pay your agent about $18,745.
  • Home repairs – Sprucing up your home before selling it is a good idea for two reasons. First, it can help make your home more attractive to buyers so that it sells for more money. Second, you’ll want to make sure that it passes any home inspections.
  • Home inspection –  This is an optional expense but can be a good idea so that you know if there is anything seriously wrong with the house before selling it. A home inspection will usually cost around $400.
  • Capital gains tax – If you assumed that you got to keep all the money from the sale of your home, think again. The government is going to want a piece of the sale.

We hope that you’ve found this article valuable when it comes to learning a few of the hidden costs of buying and selling your home! If you’re interested in learning more, please subscribe below to get alerted of new articles as we write them!

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