When we purchased a house last year I was introduced to the scam that is "closing costs". I had heard this term thrown around before in sentences like "Well after closing costs your payments will only be XXX dollars!" or "The buyer doesn't have to worry about closing costs" we even had one mortgage broker who told us that we shouldn't buy a house from someone who won't pay the closing costs. I'm still not sure what people mean when they say "closing costs" except that it is a generic term for every miscellaneous fee associated with buying a house except the purchase price and taxes. These can include Realtor fees, title fees, credit check fees, etc...We even had a fee for paperwork (after all they have to document the fees!). The main fee though is the one for the loan. This is what mortgage broker's call points (sorry, points are bad, think of it like golf) banks get paid off of interest but mortgage brokers get paid off of points. Depending on the interest rate, bank and how shady your mortgage broker is points end up being 1%-4% of the loan amount. All told we paid about 4.5% of the value of our home in closing costs. This does NOT include the 6% the seller paid in realtor fees. These are fairly small percentages but they add up to a lot of money. For example let's say you buy a home for $190,000 (the average sale price in Salem, OR). You think "Well I saved up $10,000 so I'll have 5% equity in my home lucky me!" Nope. That's not the case.
Price: $190,000
Closing costs: $8,550
Property Taxes: $2,310 (1.22% in my county and must be paid at the time of sale)
Total: $200,860
Loan amount: $190,860
Yep, you now owe more on your house than you paid for it! Contgratulations!
Wanna be angrier? Think about how much the realtor's are getting.
Price: $190,000
Realtor Fees: $11,400
So, your home (the biggest purchase you'll ever make) could have been bought for $178,600 and you would have owed $168,600 but instead you owe $190,860! That's twenty grand more thanks to all the leeches.
Bills: Before we bought a house we had no idea how much the bills would add up too. We asked a few people and they all had wildly different answers. This is mostly because of consumption and region. Here are ours but they will almost certainly be different than yours.
Electric: 26.375
Gas: 106.26 (average over December, January, February and March, will hopefully go down)
Cell Phone: 60 (two of them, more when Megan get's chatty)
Garbage: 17
Water: 50
Internet: 20 (will go up after 12 months)
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4 comments:
Points are optional, but your interest rate will go up. They are also tax-deductible the year you pay them.
We pay:
-$105/mo for electric + gas.
-$100/mo for water+sewer+garbage.
-$52/mo for HOA
-$40/mo for lawn care
I don't think phone costs, internet or cable really factor in to the homeowner discussion since they would never be included in rent and aren't affected by the size or location of your home.
hmmm...The amount of points are relative to your interest rate but we didn't see any loans with no points so I would hesitate to call them optional. Plus, when you get a loan the usually quote you two interest rates, the first one is the interest rate on the principal, the second being the interest rate on the principal + points. For example our interest rate was 5.5% but we end up paying like 5.73% because of all the points we scored.
Yes, the tax benefit is definitely the silver lining. For us though I only worked like 5 months last year so I didn't end up paying any taxes anyway.
We pay about $300 a month for electric + gas. I imagine that will be similar when we move to TX. Although our bills will probably be more in the summer and less in the winter! :)
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