Homeownership costs: PMI, taxes, insurance and HOAs

As your lender shared with you during the financing process, there are homeownership costs beyond your mortgage payment that require your attention. Most of these costs are due monthly and typically include Private Mortgage Insurance (PMI), taxes, homeowners insurance and Homeowners Association (HOA) fees.

The good news is that most lenders require you to set up an escrow account under the terms of your mortgage that fold in most of these costs for you. This means that your monthly mortgage payment will also include an escrow payment to cover your property taxes and insurance premiums. Your lender will deposit this amount into your escrow account and will pay for these items on your behalf when they are due.

• Lenders will estimate your homeowners insurance premium and real-estate property taxes yearly. Remember, it’s an estimate so at the end of the year you may get a refund or pay extra for a shortfall.

• Your taxes and insurance premiums will change over time and your escrow payment estimate will be adjusted yearly to reflect any changes.

• Check your year-end escrow statement carefully to make sure your bills are being paid and there are no mistakes. If you have questions or find a problem, contact your lender immediately as these payments are ultimately your responsibility.

HOA fees

If you’re among the many homeowners that live within a community governed by a HOA, it’s important that you pay your fees as scheduled – typically monthly, quarterly, or annually. These fees help pay for the upkeep of the common areas, including amenities such as pools and gyms. These fees are not included in your escrow account and are your responsibility. (On rare occasions, some lenders may be willing to include your HOA fees into your escrow if you make the request.)

HOA fees may cover the following types of services:

• Trash removal, water and sewage
• Lawn care for common areas
• Pest control
• Maintenance and repair for common areas

When budgeting and planning for homeownership, remember to account for your HOA fees, keeping in mind they can increase each year with the cost of services.

It’s important to pay your insurance, taxes and other fees on time and in full. This is part of your responsibility as a homeowner and non-payment can initiate foreclosure proceedings.