Homeownership has always enjoyed a central place in our society. In this day and age of conspicuous consumption, it’s easy to get caught up in the chains of gluttony where bigger is always better. Traditionally, you often start your homeowning journey with a smaller house and upgrade to larger ones as your family expands. Perhaps you might have realized you now have better financial standing and have started looking at larger ipoh new properties launches. Whatever the case, before you consider upsizing your home, make sure you have solid reasons to do so.
Homeownership is inherently riddled with emotion. We often lose ourselves in the psychology and emotions of owning a larger home that we are blinded from the actual costs associated with our seemingly well-intended choices. That is to say, we often make emotional decisions that make very little financial sense when it comes to home ownership. However, with all other factors being equal, the bigger the house, the bigger the costs will get. So, think of it as an expensive nausea as a tradeoff (or aftereffect) for the emotional euphoria of owning a larger home.
Many of us have the mentality that if you have the money to afford it, you should choke down as much house as your financial limit allows. However, remember that the cost of upgrading to a bigger home is in reality much more than just the initial purchase price. While we’re not saying that it’s bad to have a big house, we’re just saying that you should only bite off only what you can chew. You need to be sure that you have sufficient financial means to do so.
Read on for an inkling of the hidden costs of buying a bigger house.
When you purchase a property, it will be subjected to sales tax and maintenance tax. The two principal sales taxes, i.e. stamp duty and real property gains tax, the more expensive the property you purchase (in the case of stamp duty), the higher the percentage of taxes you will have to pay. The problems will continue on even when you decide to sell that larger house you bought. In the case of real property gains tax, if you sell your property after 5 years, you’ll still be liable to pay 5% of the selling price. If you sell within 5 years, you’ll be paying up to a 30% rate on taxes.
Maintenance tax, or in this case assessment tax, is an annual tax based on the rental value of a property. This assessment tax is usually paid to local authorities around 4% of the rental value, which is calculated according to the property type and location. The other form of maintenance tax, quick rent, is tax paid yearly based on the type and size of land. So, it goes without saying that a larger house usually means larger land and thus higher taxes.
Insurance is something all homeowners should consider. Assuming that a larger and bigger home is of more value than a smaller home, it goes without saying that a larger home would generally cost more than a smaller home to insure. Thus, insurance costs go up proportionately with house size.
Insurance coverage is usually not on the value of the property, but rather for the cost of reconstructing it and replacing its contents. Thus, if you want comprehensive coverage for your home, the price goes up, as you will have to buy both a house owner policy and householder policy.
The more space you have in your home, the more lights you have, the more electricity you will use, the more your utility costs are likely to rise. Although you have to take into account efficiencies of scale, you’ll still end up paying more for utility fees.
4. Maintenance and repairs
The general rule of thumb is that you should set aside 1 percent to 3 percent of your home’s purchase price specifically for home maintenance and repairs. Maintenance and repairs should be pre-empted and prepared for. Homeowners often have to deal with unexpected repairs and maintenance that pops out of nowhere. This is why you often hear homeowners grumble “it’s always something!”.
There is also a lesser known “square-foot” rule, where you should expect to spend per square foot of your house. Thus, the larger the house, the larger the roof you have to repair, the more windows you have to replace, the more carpets you have to maintain, the more it will ultimately cost to repair.
You also have to not just think about the inside of your home, but the outside as well. A bigger house usually comes with a bigger front- and backyard. This means more landscaping, more grass to mow, more cleaning bills. The list of everything larger and bigger is endless. You get the gist.
5. Furniture and décor
The more space you have in your home… You guessed it. The more furniture and décor you will need to fill up the space. Although you don’t need to fil every empty space up to the brim, you do need an adequate amount of furniture to keep your new home from looking just plain bare. What’s more is that it’s not only the big pieces that you’ll need more off. Little things, such as rugs, chairs, curtains, lamps, etc. all add up as well.
6. Keeping up with the Joneses
Let’s face it, if and when you move in to a newer and bigger house, the sentiment to get newer and nicer furniture is real. Beware of the upgrade mentality: resist the urge of keeping up with everyone else. It starts with just having a nicer home, but it doesn’t end there. Chances are, your nicer home will be in a nicer neighborhood. Pretty soon you’ll be wanting nicer furniture and interiors just to keep up with your neighbors, which are all costs that are usually unforeseen and can seriously break your bank.