Unexpected utility bills can destroy a lot of careful budgeting.
Key points
- New homeowners can face many unexpected monthly costs that eat into their budget, including higher utility bills.
- A new tool from Redfin shows energy costs as part of a property search, making it easier to estimate future bills.
- Look for ways to reduce water and electricity consumption, as even small lifestyle changes can mean more money in the bank.
When you’re buying a new property, it isn’t always easy to know how much house you can afford. You’ll want to get a good idea of your monthly costs, as that, along with your income, debts, down payment amount, and other factors will impact the size of the mortgage loan you can take on.
The challenge is that some of your costs can come as a surprise, especially if you’re a first-time home buyer. For example, if you’re renting, you likely don’t have to think much about property taxes, maintenance costs, insurance, and homeowners association fees. Other costs to consider? Don’t assume your utility costs will be the same as they are in your current home.
Don’t let utilities bust your budget
Utility costs can vary wildly from household to household and destroy your budget if you’re not careful. Things like poor insulation, old pipes, and leaky windows can push up your monthly bills considerably. You may be able to improve efficiency with home improvements, but even so, underestimating costs could impact your bank account.
There are a few ways you can work out what your utilities might cost. You might ask to see copies of the homeowners’ recent bills once you’re zeroing in on a property. You can contact utility companies directly — there are also some online tools that can help. Also, ask if the current homeowners have carried out an energy audit recently.
A new service from real estate company, Redfin, lets prospective buyers see energy cost estimates for homes as part of their initial property search. Redfin has teamed up with WattBuy to add energy costs for 85 million homes to its search. You can see your monthly electricity costs, as well as how they might change each month and what impact solar panels could have.
Reducing utility costs at home
If you’re a homeowner, it’s worth looking into structural improvements that will reduce your utility costs, especially as you could qualify for some hefty tax breaks right now. The Inflation Reduction Act incentivizes the installation of solar panels, heat pumps, and other energy-efficient renovations.
If you need to buy new appliances for your home, look for more efficient models. Even if they come with a slightly higher price tag, they may save you money over time. According to the U.S. Department of Energy, as consumers replace their appliances with more energy efficient models, they can expect to save $529 a year by 2030.
It isn’t always possible to buy new appliances or implement energy saving renovations. In that case, there are other steps you can take to slash your bills:
- Turn your thermostat up or down: A small change in temperature could translate into lower energy bills either on the heating in winter or cooling in summer. It’s also good to be aware of the temperature in your house at night and when you’re out.
- Use less water: Take shorter showers and be aware of water consumption in the rest of your home. Things like turning off the water when you’re brushing your teeth or being conscious of your consumption when washing up will all make a difference.
- Wash clothes in cold water: A lot of the time when you run the washing machine, a cold wash will do the job just as well as hot water — and for a fraction of the cost.
- Don’t leave devices on standby: It isn’t clear how much energy your devices consume when they’re plugged in but not in use. One study from the National Renewable Energy Laboratory showed so-called vampire loads could cost households an extra $200 a year. Smart power strips can help you cut that unnecessary power suck.
Bottom line
I have a friend in Europe who bought his first house last year. The high ceilings and spacious living areas looked amazing, but also meant it was extremely expensive to heat. Throw in higher energy prices, and he spent most of the winter shivering underneath several sweaters. Don’t make the same mistake — get a clear idea of what your utility costs might be before you buy. If you can find ways to reduce them once you move in, so much the better.
