Seamless home buying means budgeting right: The Best Home Buying Budgeting Tool (for Boston)

Dear Home Buyer,

We regularly ask ourselves, why can’t home buyers search and filter for homes by monthly cost to own vs. the home's asking price? After all, isn't that how people can budget what it means to own their home?

We’ve been deeply interested in helping home buyers understand if a property they would like to buy is within their means. If you can’t afford it, why go any further, right? While it may be up to a buyer’s lender to give some of this insight, given the right tools, buyers can make their own assessment fairly quickly. If it’s a Sunday night and you’re deep in love with a property, why not make your own judgment? After all, it’s pretty easy math.

Home buyers understand and digest the monthly cost to own a home better than just looking at a home’s asking or sticker price. We’ve noticed renters especially appreciate this perspective. How much will it cost to own this home? After I budget that in, with my income, how much money do I save per month to put towards fun trips, family expenses, or savings? These are the questions buyers want to answer early on and get right.

So, we’ve made a budget calculator with some great guidance. Check it out! Use it and feel free to compare properties side by side. Copy it. Duplicate it. Share it. Make it your own!

A further understanding of the types of home expenses to budget in and understand:

Your mortgage

When applying for a residential mortgage you will pay a monthly mortgage amount which will include paying back part of your principal loan and interest on that principal which the lender or bank provided you. There are varying types of mortgages, but the most common are the following: 

  1. 30 Year Fixed: A mortgage product in which the interest rate is fixed for the 30-year life of the loan.

  2. 7/1 ARM: A mortgage product in which the interest rate is fixed for the first 7 years of the loan and after that the interest rate can adjust up and down based on parameters set in the loan and market interest rates at the start of the 8th year.

Both of these loans are amortized over 30 years, which makes your monthly mortgage payment manageable. If you make less than a 20% downpayment on your home purchase, you will also have private mortgage insurance (PMI) to pay in addition to your mortgage.

As of 2014, but indicative of current tax rates by Massachusetts town or city:

Nuhom - Massachusetts tax rates

Your property taxes

Your city or town, who is tougher than the IRS, requires you to pay property taxes in order to own your property. These funds are put towards schools, maintenance, staff, and updates to local amenities such as parks and shareable spaces.

While it is voted on every year, some cities such as Boston, Somerville, and Cambridge provide a residential exemption to owners of property that live in property vs. rent the property out to others. On average, these cities provide an annual $2,300 break on your expected annual taxes. That’s money saved! If you intend to own and live in the property you can factor this into your calculation. 

Your home insurance

Home insurance provides you coverage if you have significant damage in your home. This is essential to consider.

Your HOA fees (only applicable for a condominium)