First Time Homeowners: What to Consider

Congratulations! You’ve just bought your first house. It’s exciting… and a bit overwhelming. You’re now responsible for everything. No more calling the landlord if the kitchen faucet drips, the roof leaks or a window cracks. It’s all on you financially, structurally and emotionally. There’s a lot to get a handle on. Here’s a solid start.

Taxing Work

First the fun stuff: there are tax implications when you buy a house. But it’s mostly good news. All the interest in your mortgage payments is deductible. By the end of January, your lender sends you and the IRS statements displaying interest paid the previous year. Any mortgage insurance premiums and deductible points are included, as well.

While you’re thinking about taxes, start saving receipts for home improvements. These won’t be helpful immediately, but they can make a big difference on how much tax you pay when you eventually sell your home. These investments help reduce your profit margin, so your overall gain is less… and voilà, you pay fewer taxes.

You can only include work that increases the value of your home. Maintenance repairs don’t count. Focus on significant changes that will raise the selling price when the time comes, such as the installation of air conditioning, roof replacement or a full kitchen remodel. Check with your tax specialist if you’re unsure. Don’t have one? Get one, at least in the early stages of ownership. You want to maximize every deduction.

Self-Funding

While we’re on the topic of money, here’s another tip for a new homeowner: start saving. Even if your house is in great shape, there are things you’ll want to change down the road. And if your home isn’t in pristine condition, you’ll probably face repairs sooner rather than later. How much should you stash away? A minimum recommendation is one percent of the assessed value of your house and lot. Perhaps the most painless way to do this is to save a bit every paycheck.

Use this money for maintenance and repair: spraying for bugs, repainting your house’s exterior, repairing the porch, fixing the furnace… unfortunately, the list goes on and on. And on. With this fund, you won’t be caught unprepared in an emergency.

That’s the fund for what must be done. If you can swing it, you should also start saving for home improvements you want to make. Interested in replacing the kitchen appliances, putting in carpeting, or renovating the bathroom? Those are significant expenditures; so the sooner you begin building a nest egg, the better. Add another percent or two to whatever you’re already putting away for maintenance. When you’ve accumulated enough, make your improvement. You won’t have to worry about running out of money.

Yours or Theirs?

When it comes time to actually undertake one of those maintenance or improvement jobs, who’s going to do it? Is it a do-it-yourself task, or do you need to call a professional? Before jumping in with both feet, ask yourself some questions:

• How handy are you? What experience and tools do you already have? If you mess up, you can make matters worse — fast.
• Do you have enough time? If you don’t finish when you’d hoped, can you live with an incomplete job for a while?
• How much can you afford? Even if you want to pay a professional, is that in the budget?
• Is the job dangerous? Do you even know enough do assess the risk?
• Do you understand the complexity of the job? Have you researched it? Does it need a permit? For instance, if you want to knock down a wall, do you know how that will affect your home’s structural integrity or the electrical or plumbing systems?

Be brutally honest with yourself so you don’t end up over your head… or under a pile of rubble.

Fast Fixes

You may have had a landlord who put off necessary repairs to save money. In the long run, though, that ends up costing a lot more. Small problems often escalate over time, and then you’re facing a bigger — and more expensive — headache. You’ve got a maintenance fund, so use it. For instance, a leaky roof might only need patching now. Let it slide, and water can damage the attic and ceilings, promote the growth of mold and mildew and even rot your house’s frame.

Another problem that begs for a solution is a damaged garage door. Whether you keep your car in the garage, use it for general storage or both, it offers serious protection from weather and theft. If the door doesn’t function properly, you’re exposed… in more ways than one. There are several decisions to make when selecting a door: style, material, insulation and installation method. Use your maintenance fund to take care of it pronto… your car will thank you.

Homeownership has so many pluses: you’re part of a community, you’re establishing equity and you don’t have noisy neighbors upstairs, to name just a few. But you’re also personally on the line for everything. Be aware of this, plan for the unexpected and consider short and long-term effects of your actions… or inaction. There’s a lot of enjoyment coming your way with your new house… but only if you also accept the responsibilities that tag along.