The hidden costs of owning a home

By Alexis A. Acacio, contributor
Inquirer News Service

"A YOUNG couple, prior to their house hunting, had a specific budget at hand. When they finally found a home that matched their requirements and their budget, they signed a reservation agreement with the seller in order to purchase the home. When the time came for them to fully pay the property, they were surprised to find out that they still needed a lot of money to be able to complete the transaction. The additional amount that they needed was about 15 percent of the total amount of their home. Obviously, they were not prepared for the additional expenses."

Should we blame the couple? Not at all but they should have known better. There are a lot of additional costs when buying a home and it is not just the selling price that one should look at. There are many hidden costs and sad to say, there are some developers and even realty brokers who never reveal this fact to their buyers until the closing date-when the buyers are now committed to the property.

The hidden costs of real estate transaction include:

• Transfer costs. These include the taxes that are to be paid to the government in order to transfer the ownership of the property. Among these are capital gains tax, documentary stamps, transfer tax and registration fees. If the seller is a corporation or a developer, other additional taxes are necessary. Prior to engaging in a contract to sell, make sure that the amount of transfer costs and who should pay them (whether the seller or buyer) should be clearly stated.

• Legal costs. You might need legal advice and documentation service so you will have to allot a budget for this. Prior to the engagement of help, make sure all professional fees are correctly agreed upon so as to prevent any future misunderstanding between the parties involved.

• Moving-in costs. Whether you are transferring from abroad or just within the area, moving your furniture would cost you money. Make sure they are insured since some of your belongings may break during shipping and transportation.

• Furnishing costs. Yes, furniture and accessories. Depending on your taste, your expense can be from a few thousand pesos to millions. A good rule of thumb is to allot about 10 percent of the price of the house for furniture. This budget however can easily double if you are inclined to buy high-end, European furniture.

• Loan/borrowing costs. If you need to borrow from the bank, then there are finance charges that you should consider. These include the mortgage registration fee, the documentary stamps and processing fees. Your bank or your lender can easily give you the financing charges that you would have to pay.

• Maintenance costs. Maintaining a home costs money and more so your time. For new homes, this may not cost as much but if you are moving in to a used home, you may have to prepare a regular budget for this. For a used home, some minor repairs (or even major ones) may be necessary before you can use the property.

In preparing your budget for your home, always allot an additional amount to cover the hidden costs. Setting aside about 15 percent would be a prudent move in which about five to 10 percent of the amount would go to the purchase of furniture.