Owning a Home Costs Way More Than Just the Mortgage

[dougless]

An article from the US but it interesting to see what the Yanks have to pay each month on top of their mortgages:

https://twocents.lifehacker.com/owning-a-home-costs-way-more-than-just-the-mortgage-1835120312?utm_source=pocket&utm_medium=email&utm_campaign=pockethits

[regprentice]

It's a weird tax system they have as well. Some discussion in that article as to whether what we would class as annual leasehold fees can be deducted before tax. 

[spyguy]

39 minutes ago, Ghostly said:

$360 per month on utilities? Jeebus. The property taxes can be pretty high over there too.  The mind boggles at the home owners associations too, who wants some busybody telling you how long your grass can be, etc.

AC.

 

[spyguy]

The sensible MMR rule of a mortgage not taking more than 30% of  household income is very sensible if a bit late.

 

[A17]

I live in Chicago. The house search websites here give a handy pie chart showing the break down of your total costs (mortgage, HOA, tax, insurance). It is eye opening to see that with a decent deposit, your mortgage would only be half of your costs. And remember, these costs do not stop once your mortgage is over.

In the past, local property taxes could be deducted from your federal tax bill. However, Trump is trying to cap the deduction at about $10,000pa IIRC. His reasoning is that rich people in high tax blue states like California, New York and Illinois are getting "first dibs" on the money ahead of the federal government. Plus they would never vote for him.

High property taxes do act as an incentive to downsize, and they do act as a drag on prices. In Chicago and the surrounding areas, taxes frequently run into five figures for a decent family home. A lot of retirees leave to go to cheaper states to save on the taxes (the winters don't help either!). The tax rate here ranges from about 1.8% to 3% pa. A $500k home could be paying $15k pa in taxes. Apply the same numbers to London and it makes for interesting thoughts....

[regprentice]

The article refers to utilities as a home ownership cost. In the UK tenants will be paying utilities (gas and or electric, telephone/broadband) and should be paying the council tax as well (which is probably equivalent to 'property tax' as described). In Scotland Council tax also covers the Water rates. 

So do tenants in America not have to pay the gas and electricity bills?

The author is commenting on another article and refuses to spend time looking at the costs of running a car in that other article 'because everyone has that cost whether they rent or not'. If that was also the case for utilities I'd assume he'd say the same thing? 

[dougless]

18 hours ago, A17 said:

I live in Chicago. The house search websites here give a handy pie chart showing the break down of your total costs (mortgage, HOA, tax, insurance). It is eye opening to see that with a decent deposit, your mortgage would only be half of your costs. And remember, these costs do not stop once your mortgage is over.

In the past, local property taxes could be deducted from your federal tax bill. However, Trump is trying to cap the deduction at about $10,000pa IIRC. His reasoning is that rich people in high tax blue states like California, New York and Illinois are getting "first dibs" on the money ahead of the federal government. Plus they would never vote for him.

High property taxes do act as an incentive to downsize, and they do act as a drag on prices. In Chicago and the surrounding areas, taxes frequently run into five figures for a decent family home. A lot of retirees leave to go to cheaper states to save on the taxes (the winters don't help either!). The tax rate here ranges from about 1.8% to 3% pa. A $500k home could be paying $15k pa in taxes. Apply the same numbers to London and it makes for interesting thoughts....

Thanks for that.  It helps to have an international perspective on costs.  What many in the UK seem to forget is that although our housing costs are bonkers, some of our other costs are very reasonable. For example in the UK food is relatively cheap and health care is mostly free.  As I understand it, medical costs are the single biggest cause of bankruptcy in the US and in the UK its not paying your Council Tax - the nearest thing we have to local taxes.

[iamnumerate]

On 01/06/2019 at 11:17, spyguy said:

The sensible MMR rule of a mortgage not taking more than 30% of  household income is very sensible if a bit late.

 

About 25 years too late,

[winkie]

In England they don't bother with the buildings, they just buy the land.....and store it or rent it out..most of the land is held in few hands, not saying good or bad, just that most of us are anxing over something we all need to live when something bigger is happening.?

[nothernsoul]

Not a coincidence, or unrelated that costs of buying a house in uk are high but relatively low taxes on their value. 

[Exiled Canadian]

On 02/06/2019 at 08:21, regprentice said:

The article refers to utilities as a home ownership cost. In the UK tenants will be paying utilities (gas and or electric, telephone/broadband) and should be paying the council tax as well (which is probably equivalent to 'property tax' as described). In Scotland Council tax also covers the Water rates. 

So do tenants in America not have to pay the gas and electricity bills?

The author is commenting on another article and refuses to spend time looking at the costs of running a car in that other article 'because everyone has that cost whether they rent or not'. If that was also the case for utilities I'd assume he'd say the same thing? 

When we rented in Canada the rent was inclusive of utilities and property taxes, we lived in a purpose built block of rental apartments with an onside maintenance manager. - maybe the US is the same.

 

[A17]

7 hours ago, Exiled Canadian said:

When we rented in Canada the rent was inclusive of utilities and property taxes, we lived in a purpose built block of rental apartments with an onside maintenance manager. - maybe the US is the same.

 

It is somewhat similar here. I've seen purposely managed apartment buildings with gas (cooking and hot water), basic internet and water included. Heating may be through central hot air ducts. Electricity tends to be billed by individual apartments though. Property tax is included.

 

On 02/06/2019 at 05:59, dougless said:

Thanks for that.  It helps to have an international perspective on costs.  What many in the UK seem to forget is that although our housing costs are bonkers, some of our other costs are very reasonable. For example in the UK food is relatively cheap and health care is mostly free.  As I understand it, medical costs are the single biggest cause of bankruptcy in the US and in the UK its not paying your Council Tax - the nearest thing we have to local taxes.

Yep. It was a shock getting my first monthly $200 gas bill in winter. Even in the summer it is $80. Electricity ranges from $35 per month in the winter to $80 in the summer with the air-conditioning running. This is for a two bedroom 19th century apartment, albeit with a freezing basement underneath (keeps it cold in winter and in summer!). Your home and climate hugely affect the bills in this country, far more than in the UK (unless you live in some huge rambling old pile). There is a huge difference between the UK and USA. In the UK the hard work is affording the house in the first place.  Once you have the house, due to the smaller sizes, milder climate (both summer and winter) and the low property taxes your work is pretty much done. In the USA, you can buy a huge McMansion for comparative peanuts, but then have to face the utility bills and property taxes.

[iamnumerate]

On 02/06/2019 at 11:59, dougless said:

Thanks for that.  It helps to have an international perspective on costs.  What many in the UK seem to forget is that although our housing costs are bonkers, some of our other costs are very reasonable. For example in the UK food is relatively cheap and health care is mostly free.  As I understand it, medical costs are the single biggest cause of bankruptcy in the US and in the UK its not paying your Council Tax - the nearest thing we have to local taxes.

If you have teeth problems or need to go a physio a lot, health costs in the UK can soon add up - of course it is better than the US. 

[MancTom]

On 02/06/2019 at 11:59, dougless said:

Thanks for that.  It helps to have an international perspective on costs.  What many in the UK seem to forget is that although our housing costs are bonkers, some of our other costs are very reasonable. For example in the UK food is relatively cheap and health care is mostly free.  As I understand it, medical costs are the single biggest cause of bankruptcy in the US and in the UK its not paying your Council Tax - the nearest thing we have to local taxes.

Utilities are also much cheaper. Most other western countries I have experience of have few companies and high prices. Whilst here if you shop around regularly you can pay almost nothing for e.g. broadband and mobile phone access.

[MancTom]

21 hours ago, Exiled Canadian said:

When we rented in Canada the rent was inclusive of utilities and property taxes, we lived in a purpose built block of rental apartments with an onside maintenance manager. - maybe the US is the same.

 

When I lived in California I had to pay utilities myself.

[iamnumerate]

21 hours ago, Exiled Canadian said:

When we rented in Canada the rent was inclusive of utilities and property taxes, we lived in a purpose built block of rental apartments with an onside maintenance manager. - maybe the US is the same.

 

Strange doesn't that just encourage people to waste electricity and gas? People might think,  "Lets just leave the heating on when we go out for the day, so that when we come back it is warm" - very few people who have to pay for it would do that.

[Jason]

On 04/06/2019 at 12:48, iamnumerate said:

Strange doesn't that just encourage people to waste electricity and gas? People might think,  "Lets just leave the heating on when we go out for the day, so that when we come back it is warm" - very few people who have to pay for it would do that.

Many blocks in Canada have communal heating, so only one [much larger] boiler.

[winkie]

13 minutes ago, Jason said:

Many blocks in Canada have communal heating, so only one [much larger] boiler.

Denmark also.....water is piped already hot, no boilers required in many of their homes.....?

[GregBowman]

On 01/06/2019 at 17:08, A17 said:

I live in Chicago. The house search websites here give a handy pie chart showing the break down of your total costs (mortgage, HOA, tax, insurance). It is eye opening to see that with a decent deposit, your mortgage would only be half of your costs. And remember, these costs do not stop once your mortgage is over.

In the past, local property taxes could be deducted from your federal tax bill. However, Trump is trying to cap the deduction at about $10,000pa IIRC. His reasoning is that rich people in high tax blue states like California, New York and Illinois are getting "first dibs" on the money ahead of the federal government. Plus they would never vote for him.

High property taxes do act as an incentive to downsize, and they do act as a drag on prices. In Chicago and the surrounding areas, taxes frequently run into five figures for a decent family home. A lot of retirees leave to go to cheaper states to save on the taxes (the winters don't help either!). The tax rate here ranges from about 1.8% to 3% pa. A $500k home could be paying $15k pa in taxes. Apply the same numbers to London and it makes for interesting thoughts....

My son  married an American and even though she is a Floridian they are in Brooklyn NY (she loves the winters........) We regularly compare all the taxes he pays and he has been telling me about the property tax situation.

When you add in what he has to pay for top drawer health cover at his corporation a $400 dollar top contribution - therefore whilst the effective income tax rate might be a bit lower when you add in property and health cover can be a different story.

  

Edited June 10, 2019 by GregBowman

[GregBowman]

On 04/06/2019 at 08:02, iamnumerate said:

If you have teeth problems or need to go a physio a lot, health costs in the UK can soon add up - of course it is better than the US. 

You can easily insure against big dental bills with something like Denplan a fraction of the cost of  the states. The physio thing I can see costing a bit and hard to insure against 

[iamnumerate]

1 hour ago, GregBowman said:

You can easily insure against big dental bills with something like Denplan a fraction of the cost of  the states. The physio thing I can see costing a bit and hard to insure against 

True - although if you are on low wages and young not something you would think about it.  Of course in theory we are not meant to need private health insurance in the UK - in reality we sometimes do.

[GregBowman]

16 minutes ago, iamnumerate said:

True - although if you are on low wages and young not something you would think about it.  Of course in theory we are not meant to need private health insurance in the UK - in reality we sometimes do.

Totally agree re young or on low wages and as you say in theory...

[winkie]

A visit to the vets was once very affordable before pet insurance became something normalised......now vets are totally unafordable for those without insurance......have to then rely on animal charities......?