At first glance, a new home may appear to be more expensive than a used one. Before you decide to eliminate new homes from your search, based on list price, learn about the many ways new homes will save you money, and may (cost) less than you think.
If you take a close look, many times, you’ll discover that the real cost of living in a new home is much less than what you’ll pay to live in a “cheaper” used one. Before you finalize your new home purchase, you may want to do a little research on The Real Cost of New Home Ownership.
It’s not always what you spend on purchasing a home that makes all the difference. In many cases, what you don’t spend that will make the biggest impact on your life. Using a simple chart to understand the real cost of new home ownership is a great tool for home shoppers. It’s also an incredibly effective way for new home salespeople to use to help home shoppers understand that living in a new home may just be less expensive than what it costs to live in your current home or the used home you’re considering. This tool can shape the way you shop, determine where you look to buy, and what you can get in the home you finally purchase.
Analyzing the real cost of new homeownership is easy, just create a worksheet is fashioned like a large “T” with your current expenses on one side of the vertical line and the cost of the new home on the other. Label the columns appropriately and then begin entering the cost of certain items. Start with the mortgage payment you’re making for your current home (or the used home you’re considering.) Create separate entries for all your property taxes, insurance, and warranty payment. For some items, include any repairs you’ll need to make to the used home or any upgrades (such as floors, paint and carpet). For some of these expenses, such as carpet, floors or repairs, divide the total number by 12 to get the monthly amount. Next, put in any upgrades that you’ll need to make to the used home such as paint, countertops, or fixtures and divide the total amount of those things by 12 to get a monthly equivalent. The reason you won’t have to incorporate these items into your new home monthly cost is that many of these items (flooring, fixtures, counter tops) are already in the mortgage cost. Another consideration is landscaping. Landscaping costs money and the water you’ll waste without a programmable sprinkler system can really add up. If these things are appropriate, there should be some corresponding entry on the “Pre-Owned” side of your ledger. Take special notice of the roof or the used home. A new roof can cost ten to fifteen thousand dollars. Many used homes have a serviceable roof, but the first big storm can change all that. Next, take a look a the monthly cost of transportation to work and school. If you’re buying a new home that is closer to these places than the pre-owned home you’re thinking about, make sure you include those things as part of the cost of the used home. If you’re leaving your appliances behind, such as the case when you’re moving away from a leased property or apartment, you’ll need to get new appliances if you’re moving into a pre-owned home. Most new homes come with appliances included, so make sure you enter the cost of a new washer, dryer, dishwasher, microwave, and refrigerator on the “used home” side of your chart, dividing by 12 to get the monthly cost of these items. Another big advantage that new homes have over a used home is in the area of energy efficiency. Depending on the age of your home, your monthly utility bills could be as much as 50% lower with a new home. Your new home salesperson should be able to provide you with current bills from residents in the community. Most new homes already come with expert landscaping and sprinkler systems. Take a good look at the front and back yards of the used home you’re thinking about buying. Compare those to the actual energy bills that the owner of the used home you’re considering is paying. New insulation, materials, radiant barrier in the attic, tank-less water heaters, and high-efficiency heaters, and air conditioning systems can save you hundreds of dollars per month. Many new home communities have features like community pools and fitness facilities. If you plan on taking advantage of these, you may be able to ditch that athletic club membership and save some money there as well.
Finally, take special note of where you’re buying a new home and if there are any allowances or tax breaks for particular areas or if you plan to use new energy sources such as solar power. Include any credits in your analysis.
DON’T FORGET ABOUT YOU.
Old homes, just like old cars, need constant attention and tinkering. If you’re buying a home that is over ten years old, you should absolutely plan on updating the home, and updating an old home isn’t cheap. We addressed landscaping above, but things like plumbing, wiring, HVAC systems, carpet, walls, ceilings, and masonry just wear out over time. They will need to be repaired when they break, and nothing seems to break at a good time. Heaters never break in the summer; they stop working as the first Fall freeze hits. Air conditioners go out just as the first summer heatwave begins. Your time is money, and every moment you’re spending fixing a broken socket or a leaky pipe is time away from doing things with your family. All old homes will eventually have to be updated if you want to sell them down the road, but simple maintenance is a monthly task and a monthly cost. I’d recommend adding a couple of hundred per month just to these costs to have a realistic idea of what you’ll really spend to live in the pre-owned home.
As you’re doing this, you’ll quickly see the many areas new homes will save you money . For many of the costs you’ll enter on the used home side of the ledger, there simply is no corresponding cost for a new home. Maintenance, remodeling, appliances, upgrades and repairs simply won’t exist for many years on a new home because everything is new and won’t need to be addressed. Warranties are not included in used homes for the home itself or the old appliances and systems in them. To protect yourself and your family, you’ll have to purchase a warranty. New homes, include warranties on the home itself and and all the appliances. In other areas, such as property taxes and transportation, there should be costs for both new and used homes.
Once you’ve included all the items and costs you can think of, add the items’ costs to get a total monthly cost of living in the new home and the used home you’re considering purchasing. In many cases, you may be surprised to discover that the cost of living in the new home, even with a higher list price, is considerably lower than living in the used home.
Finally, there is one item whose cost is difficult to quantify and probably won’t appear on your list. Peace of mind is often the most important reason that you’re buying a new home.
What is the value of a better school for your children, a safer environment or a local pool? How much is it worth not to have to worry about things breaking, the constant repairs or the unplanned cost of a new HVAC system showing up at an inopportune time? What is the value of knowing that your new home was built with the safest, most environmentally friendly items and materials?
Peace of mind is certainly hard to put a price on, so let’s just say this is one of the things you get with a new home that is simply priceless!