When many people consider getting a mortgage, they come into the process a bit unprepared. 

Previously we have covered the basics of a mortgage and how to acquire one.

Now, let’s look at some of the additional costs that are often overlooked but including in your mortgage. 

Additional Costs in a Mortgage Payment

When many people think of a mortgage payment they think only of the interest and principal payments. 

In addition to these base payments, you will also have to pay property taxes, home insurance, and additional fees. 

Depending on where you live, the costs of these categories could drastically change.

Property Taxes

Property Taxes can drastically change depending on a number of factors.

When your property is assessed, the age of your build, type of home you have, size of the property and location of the property all affect how much in taxes you may pay.

Additionally, property taxes can increase yearly.

Even if you do no upgrades on your house, your taxes will probably increase almost every year, adding to the additional costs.

Home Insurance

Similar to property taxes, your home insurance costs can be affected by a number of factors.

Insurance.com has a helpful article explaining 5 main factors that affect your home insurance. Below we briefly explain them.

The Cost of Replacing your Home

A home worth 400k will cost more to replace than a home worth 100k. The home insurance on the 400k home will consequently be higher. 

Different Risk Factors Associated with your Home

Some of these factors include if you have a swimming pool, the condition or age of your roof, and how close you are to a fire station.

Risk Factors Associated Specifically with the Homeowner 

These may include what your credit history is and even your marital status. 

What the coverage is on the home policy

There are multiple factors that affect your coverage needs from the amount of assets you have to your deductible amount.

The claims history of the owner and the home

If the homeowner or the house itself has a history with claims being made, then insurance will raise.

Closing Costs and Points

Finally, there are some very misunderstood but important terms you need to be aware of. 

Closing Costs

Closing costs are something that everyone must deal with when getting a mortgage or refinancing their mortgage.

Understanding the realities of what closing costs are is a very important step in getting your mortgage. Too many people have been blindsided and taken advantage of with these costs.

Points

Points are another misunderstood mortgage term. 

We have gone into greater detail on what points are and how they may benefit or harm you in your mortgage process. 

Hopefully, this article has illuminated some of the realities of a mortgage so when you or a loved one is buying your next house, you have a bit more confidence in what you are getting into.

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