If you’re in a position to purchase a million-dollar home, you may think the hard part is coming up with a down payment and paying the mortgage each month. However, that is just the beginning. There is a lot that goes into owning an expensive home. So, how much does it cost to maintain a million-dollar home? Read on to find out.
How Much Does it Cost to Maintain a Million Dollar Home?
You might be surprised at all the expenses that go into an expensive home. Once you move it, the fun just begins when it comes to spending money.
Here are some of the most common expenses beyond your mortgage payment and purchase price not to mention the hidden costs of a pricy home.
But first, let’s figure out where this house is going to be. If you’re talking about New York City, then that million dollars might get you a small two-bedroom condo – maybe.
If you’re talking about a smaller city in the middle of the country, then your million dollars might buy you a 5,000 or 6,000 square foot home with large grounds and lots of living space.
For this article, let’s say this home is in the middle of the country and you have a 5,000 square foot home with a pool and nice grounds.
1. Property Taxes
When you purchase a $1,000,000 dollar home you can expect a high property tax rate.
Your property tax will depend on a couple of things such as where you purchased your real estate and how much you paid for your home.
The larger the home the higher the property tax.
The bigger the city, the higher the property tax as well.
The national average property tax in the United States and a good rule of thumb is just over 1 percent at 1.080 percent of the assessed value of your home.
So, if you have a house with an assessed value of a million dollars, your annual property tax would be $10,800 dollars per year.
Of course, some states are much higher than others. If you have that house in Illinois, your property tax would be over $23,000 dollars.
You can check out what your property taxes will be based on the value of your home and your location here with this free calculator.
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Of course, you will want to keep the place cool in the summer and warm in the winter, that’s only normal.
What isn’t normal is what you may be paying for your utility bills.
Depending on your home, you might have cathedral ceilings and large rooms. Your total square footage could be 5,000 or more.
With that kind of space, you will be looking at $2,000 or even $3,000 dollars per month for electricity and gas.
Heck, even in my small 2,000 square foot home in Illinois, my heat bills can run $300 to $350 a month in the winter.
The larger your home and the higher the ceilings, the larger the utility bills will be.
Also, if you live in the northern part of the country, your winter month’s bills will skyrocket.
Down south, such as Florida, your summer air conditioning bills will be higher as well. There’s really no way to get around it.
3. Insurance Cost
If you own a home, then you have to have homeowners insurance and those insurance premiums can skyrocket with an expensive home.
Just like when other expenses, the larger your home or the more it is worth, the more expensive your insurance will be.
Like everything else, insurance rates will change depending on where you live, but a good national average to use is $0.18 per $100 dollars of coverage.
Keep in mind, it is not just your home but also your belongings that you will ensure.
That means to cover your million dollar home plus everything in it, plus any additional structures on your property, so you will need about 2 to 2.5 million dollars of insurance.
That means to cover everything, your yearly premium would be $4,500 dollars per year.
4. Homeowners Association
There is a good chance that if you are buying a super expensive home, that it will be in a neighborhood that has a homeowners association.
Beyond the rules and regulations that come with these associations, there are also fees.
These fees can be as low as $100 dollars per month to up to $700 dollars per month or more.
The fee amount will be determined in part by the benefits the association offers you as a homeowner and any included maintenance costs that they cover.
5. Private Mortgage Insurance
Most banks or lenders require you to have a downpayment of 20 percent.
That means for a 1 million home you would need to have $200,000 dollars for your down payment.
What happens if you don’t have $200K for a downpayment?
Your lender might allow you to put down less, but then they would require you to take out private mortgage insurance.
This will increase your monthly mortgage payment.
If possible, do put down the full 20 percent. It will help keep the cost of your monthly mortgage payment down and make paying for it easier and you will end up paying less for your home in the long term.
So, give it a lot of thought before you buy as using this type of insurance isn’t always the best financial decision.
6. Maintenance Fees
With a large home comes lots of monthly maintenance. This can include housekeeping, new filters for your HVAC, cleaning supplies, and general upkeep.
Larger homes always come with larger expenses.
If you plan on having someone clean your home, as most wealthy families do, then you will have to decide if this is someone that comes in once a week or every day.
You should also determine a budget for basic maintenance. As a homeowner you know that small and large things tend to go wrong or need to be repaired on a pretty regular basis.
7. Your Swimming Pool
With this nice of a home, you will most likely have a swimming pool.
That’s great and a lot of fun, but it will also increase your insurance costs and you will most likely want a service to keep your pool clean and running smoothly, so you and your family can simply enjoy it without all the hassle of maintaining it.
The average maintenance cost during the summer months is between $500 and $800 dollars but can go as high as $1,500 dollars.
8. Household Staff
I mentioned having someone to do the housekeeping, but what about the cost?
If you have a live-in housekeeper, you are looking at $25,000 to $35,000 dollars a year plus benefits.
If you have someone coming in daily or weekly, you can plan on about $50 to $75 dollars per hour.
If you spend hundreds of thousands of dollars on your home, you certainly want it to look its best on the outside.
Unless you want to spend a good deal of your free time working in your yard, you will need to hire someone to take care of it for you.
Landscaping costs can add up quickly. On the high end, if your grounds are extensive, you can spend up to $100,000 dollars per year.
On the smaller size, you can expect to spend $20,000 to $30,000 per year.
Not to mention, if you have a homeowners association, they will have certain requirements that you will need to meet, or you will be fined.
These landscaping requirements will add additional costs.
Even if your new home is brand new, sooner or later there will be issues.
You might need a new heating and air conditioning system, or the electrical system could come tumbling down and let’s not forget the plumbing or a new roof.
Even in my small home, I just had new plumbing installed and a new heating system and it was $35,000 dollars total.
In a much larger home, you can easily add a zero at the end of that cost.
If you’re on the coast, you also need to worry about flooding or hurricanes.
Your home could be totaled, and while insurance may – or may not – pay for part of the repairs or rebuilding, you can’t count on it to cover all of it.
This is true with fire insurance as well.
To Sum it All Up:
There are a lot of expenses beyond your monthly mortgage payment and insurance costs when you own an expensive house. Be sure to figure out how much upkeep, household staff, lawn care, utilities, and homeowner association fees will be before you take a dive into the deep end of the real estate market.