not-so-random commentary: buyin' a place -- anywhere

[walkitout]

The Sports Season -- Political Season, that is -- is about to start here in Brookline. I've been quietly active in the pre-season, causing trouble associated primarily with the library. I'm hoping to understudy as a trustee this year.

Recently, someone sent a very unpleasant letter to the selectmen (I have not yet been able to read it myself) complaining about the vast expense of living in town. Basically, property taxes, because other than a pretty minor restaurant sales tax, and an annoying unearned income tax that few people in the state ever encounter, that's the only tax there is in this state. But that does mean it's not low, and if you aren't expecting it, and bought all the house they let you, those taxes can push you right over the edge. Like, lose your house, edge.

Of course, the vast majority of the property tax goes to pay for the schools, so if you want to wail and moan about taxes effectively, one should do it to the school board/at the school board meeting, not to the selectmen/at Town Meeting. The selectmen, I understand, were kind enough to point this out to her, and also to direct her to meetings where she could learn more about her Tax Dollars At Work, and do her New England bit to be frugal. (After all, the town portion of taxes actually went _down_ this year.)

I laugh, of course, because I'm not paying property taxes out here (that'd be R.'s property and R.'s expense). I do pay property taxes in Seattle (I try to remember, but sometimes they are late), but those are considerably lower, even tho sometimes that property is valued higher than this one. I don't get to laugh very hard, tho, because I have to pay home owner's dues.

Let us, then, consider the cost of ownership:

home owner's association dues
property taxes
mortgage payment
electricity bill
heating bill
cooling bill
water
sewage
garbage

Here in DIY heaven, we bring our garbage and recycling to the town transfer station. We have a well, but pay for the electricity to run the pump, and sometimes have other costs associated with filtering or otherwise treating the water. We have a septic system, which has to be pumped every few years. We have AC (electricity bill, plus maintenance), a furnace (electricity on the fan, propane for the burner), a cookstove (propane for stovetop and oven), washing machine (electricity and water and sewage), dryer (propane and electricity), dishwasher (water, sewage and electricity -- oh, and maintenance on everything). No mortgage payment ('cause my husband is frugal). Lights, computers and similar. Property taxes (high enough to make a person nervous, and they went up a _lot_ this year). No association.

Never, ever, ever compare the rent bill to the mortgage payment. Ask the questions. Find out what's included. You might be shocked to discover what's involved in keeping a bunch of appliances up and running. Or keeping the place liveably cool/warm.

Our friend M. bought a condo a few years back. We helped him move in. I cleaned a bunch, because it was clear that even the carpet cleaning done for the sale was inadequate; the previous owners apparently never vacuumed. Eeew. And you should have seen the paint they used on the walls -- they bought cheap stuff and mixed it. Looked like vomit. Seriously. (Not chunky, but that icky pink color.) Over the first few months, he kept encountering all kinds of stupid lack-of-maintenance stuff that was the result of people-who-should-only-ever-rent being able to afford to buy a condo during a massive fall in the market back in the '90s. Nothing wrong with the construction and he likes the place. But catching up cost a bunch.

Comments

[jinasphinx.livejournal.com]

This is a really good list of expenses. I just want to add one -- actually, two -- things: insurance. By which I mean (1) the homeowner's insurance on the structure of the house/building, which you are required to have by the mortgage lender; and (2) the insurance you don't have to buy, but really should, from Allstate or whoever to cover replacing all your things if they're stolen, catch on fire, whatever. I think these are two separate expenses, but if I am wrong, then please correct me. :)

insurance!

[walkitout]

Very good point!

Insurance on the stuff inside (furniture, clothing, etc.) would be an example of an expense that would be the same whether renting or buying (but a lot of renter's don't _have_ renter's insurance, when they should).

Insurance on the exterior walls would be an example of an expense that would be covered in your home owner's association dues (in a condo/co-op), your responsibility (in a free-standing home) and unavoidable if you have a mortgage, and the-person-you-rent-from's responsibility if you rent.

Insurance on the interior walls would be a little funny: yours if you own the house, person-you-rent-from if you rent, yours if you own the condo. Dunno in the case of a co-op.

In practice, when you buy a renter's/condo/homeowner's policy, they ask you a lot of question and quote you a number that includes whatever you are supposed to have. All of the above pay to you if something bad happens.

Then there's YET ANOTHER expense if you have a mortgage and paid less than 20% down, which is private mortgage insurance. You (as the borrower) must pay insurance that _pays out to the lender_ in the event you default. The idea is, the lender figures they can get 80% of the value of the house back, but they probably can't get 100% of the value of the house back if you default.

Rules have changed on that, apparently.

http://www.frbsf.org/publications/consumer/pmi.html

Re: PMI

[rolandgo.livejournal.com]

Our friend M tells me that nobody gets PMI now.
Instead they finance the first 80% of a mortgage
with a regular one and then the rest as a 2nd mortgage.
That makes a modest amount of sense.
The extra interest is usually way less than the PMI premium.
IIRC in '93 PMI on a $128K principle was between $150 and 200.
And you had to carry it for 24months minimum.
2-4% on $10K-$50K is less...