A Complete Guide to Homeowner Costs in Pennsylvania
Owning your own home can be the culmination of a life-long dream. But once you sign on the dotted line and become a homeowner, your work isn't over -- it's barely begun. That's because while owning your own home has many advantages over renting, it's also a big responsibility, and you never want to take being a homeowner for granted.
Regardless of what you've heard, it's not all smooth sailing when it comes to owning your own home. While ownership is often cheaper than renting a comparable property just about anywhere, including in the great state of Pennsylvania, homeowner costs can catch you by surprise if you're not careful. When you compare a mortgage to what you see in the local rental market, you're not comparing at the same thing. And while it's admittedly the biggest part, a mortgage is just that -- a part of the total cost of homeownership that you'll face as an owner.
When you rent, you're given an all-in price, which reflects the mortgage, property taxes, insurance, and other costs that go into owning property. As a renter, you won't see any of that, but it's baked into your rent, and if there's a big repair, renovation, or another issue that hits the owner, you can be sure that your rent will be going up to match.
As an owner, your Pennsylvania homeowner costs are yours and yours alone. From the mortgage payment to property taxes and more, if it has to do with your home, it's on you to pay the bill and ensure that your home doesn't fall into disrepair. After all, it's up to you to protect the equity and value of your home, and that means covering all the costs.
The number one expense for homeowners is that all-important mortgage. It's a loan for all the money you'll need to borrow to purchase your home, and you'll have to pay it in full each month unless you want to donate your home to the bank.
You may have heard about property taxes before, but if you've never paid them, you could be in for a surprise. In Pennsylvania, the property tax rate is a high 1.58%, which is much higher than the national average of 1.08%. That means each year, you're on the hook for 1.58% of your home's purchase price. On a $300,000 home, that's over $3,200 a year, or an extra $270 a month.
Another Pennsylvania homeowner cost is insurance, which you'll need for your home and possibly your mortgage if you put less than 20% down. The homeowner's insurance is typically required by your mortgage lender, and it protects your home in the case of fire and other events, but it doesn't include flood insurance, which is an add-on. Mortgage insurance is another requirement for buyers that put little down on their homes, and most times it's included in your monthly mortgage.
To help pay for property taxes and other costs during the year, an escrow account is typically opened when you close. And while you'll be paying into it during the length of your mortgage, homeowners often have to fund this account at closing in case property taxes and other bills are higher than the estimates.
You've probably heard of "points," but they're just up-front charges usually in the low single digits that you pay on top of the home's final sale price. That said, points can sometimes jump into the high single digits, which could represent a significant expense, so make sure you understand the terms of your mortgage before you sign it.
Closing is one of those Pennsylvania homeowner costs that can vary considerably, and they include the aforementioned points, escrow, and other costs such as lender's fees, processing fees, underwriting fees, appraisal costs, title insurance, recording fees, document prep fees, and credit report fees. Closing costs are often in the 1% to 3% range, but they can also be much higher, so keep an eye out.
While renters are familiar with utility costs such as electricity, gas, or the internet, they may not be used to paying the water bill, sewer bill, and garbage collection bill. Sure, these aren't as significant as other costs, but they could add an extra hundred or two to your monthly payments.
If you've never owned in a neighborhood or building, you probably have no idea what HOA fees or dues are. But many owners know that HOA fees -- which are used to cover maintenance, upkeep, and costs associated with community features such as a pool or workout facility -- can vary wildly. Some neighborhoods might only charge $20 or $30 a month, while buildings with many amenities could demand hundreds each month.
But the biggest wild card in Pennsylvania homeowner costs is maintenance. There's no way around it, and time will undoubtedly throw you a few curveballs or two when it comes to long-term homeownership. From the negligible cost of replacing a filter or two to the major cost of buying a new air conditioning system or replacing your entire roof, maintenance isn't something to scoff at, especially with older homes. Experts suggest budgeting about 1% of your home's value per year for maintenance.