If you choose to buy a home, you will need to budget for the following expenses:
- A mortgage payment (A): This is the monthly payment you make to the lender to pay off the loan you took out to purchase the home. It typically includes both the principal (the amount you borrowed) and the interest (a fee charged by the lender for lending you the money).
- Homeowners insurance (C): This insurance protects your home and belongings in the event of damage from natural disasters, accidents, or theft. It is typically required by mortgage lenders and is usually paid for annually or semi-annually.
- Property taxes (E): These are taxes that you pay to the government based on the value of your property. The tax rate and frequency of payment vary depending on where you live.
- A down payment (G): This is the initial payment you make towards the purchase of your home, which is typically a percentage of the home's purchase price. The larger the down payment, the lower your monthly mortgage payment will be.
- Utility payments (H): These are payments for services such as electricity, water, gas, and internet, which you will need to pay monthly.
You do not need to budget for a rent payment or renters insurance if you are buying a home. However, if you are renting a home or apartment, you will need to budget for rent payments and renters insurance. A security deposit may also be required when renting, which is typically a one-time payment equal to one month's rent.