When you’re considering moving, it’s easy to simply compare the cost of your current rent or mortgage to the rent or mortgage that you’d be paying in your new home and decide that the new situation is less expensive and thus a good move.
Relying on that simple of a calculation, though, can be a giant mistake. You need to step back and look at the bigger situation before making the leap into the unknown.
Before you pull the trigger on any move, consider all of the following costs, both where you currently live and where you’re going to be living.
Mortgage or rent This is the easy comparison. What’s your current mortgage or rent? What will be your new mortgage or rent? The comparison starts here.
Maintenance Upkeep is a major consideration, particularly if you’re moving from a rental situation where the landlord takes care of maintenance concerns to a home ownership situation where you’re taking care of those concerns. A good assumption is to figure that 1% of the value of your home will be used for maintenance each year. So, if you’re buying a $120,000 home, that means you’d be spending $1,200 in maintenance a year, or $100 a month.
Utilities Not only are utility rates different in different areas, you’ll find that larger homes cost more to heat and cool and tend to drain significantly more energy than smaller residences. A quick rule of thumb is to divide the new square footage by the old square footage and multiply that by your old energy bill. You’ll also want to check on the costs of other services in your new area.
Insurance Homeowners insurance can be a real surprise, particularly for people moving from rental situations. The annual cost of homeowners insurance is usually around 0.75% to 1% of the cost to rebuild the home (not including the land). That can be a real shock to renters paying only a tiny amount for rental insurance.
Location If your new home puts you further away from your job, then there’s a cost due to the addition to your work commute. The same is true of travel for regular social events, grocery shopping, and other routine tasks. How much will you be driving in an average week from your new home’s location? Figure $0.30 per mile (approximately, for fuel, depreciation, maintenance, and so on) and you’ll see how much it adds up to.
Property taxes This can be another real surprise if you’re moving from a rental situation. Annual property taxes, depending on your area, can range from 0.5% to 3% of your property’s value. Check with the assessor in your new county to figure out how much that would be.
If you total up these costs, you’re likely to find that your move is going to cost you far more than you think. The multitude of expenses following a move can really add up and leave you in an uncomfortable spot if you’re not prepared.
Use this information carefully when you consider your move. You might find that a different home makes more sense.
This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.