Becoming a homeowner is a mixed bag of emotions. On one hand, it’s the cornerstone of the so-called American Dream, a goal that many people aspire to achieve. That leads to feelings of joy and excitement. On the other hand, homeownership is a huge responsibility. That generates feelings of apprehension and uncertainty.
While there’s no way to completely predict and evade the perils of homeownership, preparation is essential to preventing the shock that comes with setbacks and surprises. What’s more, knowledge is power; the more homeowners know, the better off they are in the long run.
With this in mind, let’s take a look at six things every homeowner needs to know:
Contents
The limits of homeowners insurance
The typical homeowners insurance policy covers a lot of potential damage to your property. But it doesn’t cover everything. Moreover, the threats it doesn’t cover may surprise you in the event those perils ever materialize. For instance, most policies won’t cover flood damage, earthquake damage, or sewage backups. You’ll likely need additional policies to cover these and other threats. It’s essential to go over the policy in order to know the extent of your existing coverage. From there, you can tack on additional policies as you see fit.
How to get equity out of your home
The less you owe on your home, the more equity you’ve accrued. Even if you don’t plan on tapping into your home’s equity anytime soon, it’s important to know how to do so if you change your mind. Common ways to get equity out of your home include home equity loans, home equity lines of credit (HELOC), cash-out refinancing, sale-leasebacks (SLBs), and reverse mortgages. Each option has its advantages and disadvantages.
The cost of major home repairs
Hopefully, you won’t have to spring for a major home repair for a while. But sooner or later, every house develops a significant problem that requires immediate fixing. Knowing how much you’ll be spending will prepare you for when it happens. For instance, the average foundation repair cost in the United States is $4500. The cost to replace a roof is about double that price. Homeowners are advised to have savings accounts for major home repairs with a minimum of $10,000 available if needed.
State HOA laws
Your home might not be under the jurisdiction of a homeowner association, in which case you don’t have to worry about this one. But for those who are part of an HOA, it’s essential to understand the applicable laws in case there’s ever a problem. From issues over fencing to noise complaints and more, it’s theoretically possible for the HOA to put a lien on your house due to non-compliance. It all depends on the state laws governing HOAs as well as the particulars of the agreement you signed. An intimate awareness of what the HOA can and can’t enforce will help you to avoid problems and figure out the right solution in the event they occur.
The payoff date
It might be 15 or 30 years from now, but every homeowner should have a general idea of when their mortgage will be paid off. It depends on how much they put down, how much they pay each month, the interest rate, and whether or not they opt for a cash-out refinance at some point down the road. While it’s not exactly imperative for homeowners to know when they’ll have their mortgage paid off, that knowledge helps them map out their future in a more reliable manner.
The value of their home
The value of your home will change over time due to various factors. Having a rough estimate of your home’s value will come in handy when making plans for the future. It will also clue you into any repairs or renovations you may want to have done at some point. Lastly, keeping track of your home’s value will keep you one step ahead of the real estate market.
Homeownership is a big step in the right direction. But it also comes with many potential risks, especially for those who lack the information to be adequately prepared. With this in mind, homeowners need to know certain facts and figures in order to ensure the American Dream doesn’t turn into a nightmare.
Julie Steinbeck is a freelance writer from Florida. She enjoys writing about business, finance, health, and travel.
