Biggest "HIDDEN" Cost Now Isn't the Mortgage

[Marc Winter]

It’s the insurance bill.

And frankly, I think a lot of people are missing it. 

Over the last few years, homeowners insurance premiums have climbed sharply all across the country. Not just in Florida or California either—it’s happening almost everywhere.

Have you opened a recent insurance renewal notice lately? You probably already know exactly what I’m talking about.

The way I see it, there are really two big things driving this: first, insurance companies have taken massive hits from storms, flooding, fires, and other weather-related claims. Second, the cost to rebuild or repair homes has gone way up: materials, cost more, labor costs more, EVERYTHING costs more!

And all those costs get pushed right back onto homeowners through higher premiums.

The part some buyers don’t fully think through is insurance affects affordability too. Many folks laser-focus on mortgage rates — that makes sense — but rising insurance costs increase the monthly payment just like a higher interest rate does.

I’ve sadly seen situations where buyers qualify for the mortgage itself, but an updated insurance quote pushes the monthly payment too high, and suddenly the buyer can't qualify, and the deal no longer works. That’s becoming a real thing.

You've seen in parts of the country, carriers are pulling out altogether because they simply don’t want the risk anymore. That leaves homeowners with fewer choices and much more expensive policies.

The bigger picture here is this: owning a home isn’t just about the purchase price anymore, because EVERYTHING MATTERS: taxes matter, maintenance matters, and utilities matter.

Insurance is becoming a much bigger piece of the puzzle than it was just a few years ago.  Now, that doesn’t make homeownership a bad idea, it just means buyers must run the numbers more carefully and think long-term--don't get yourself stretched too thin.

Curious what folks are seeing in their own areas.

Have your homeowners insurance premiums jumped recently too?

[Janice Carter]

@Marc Winter I agree. This is a nationwide issue and one of the biggest expenses facing both homeowners and real estate investors today. Many buyers focus solely on the mortgage payment but insurance premiums can have a major impact on affordability and cash flow. I have also seen situations where a deal no longer works because the insurance costs came in much higher than expected. Insurance is definitely no longer a line item that can be overlooked when evaluating a property.