This article organizes the regular monthly and annual expenses that friends interested in purchasing property in the U.S. will need to pay after buying a house. Before purchasing a house, do not forget to consider these costs and assess your payment ability. Wishing everyone the best in finding their dream home.
1. Property Tax in the United States
For many buyers with a demand for property in the United States, property tax is a well-known topic. Living in China, where there is no property tax (though this may change in the future), it is difficult to accept the idea of having to spend a significant amount each year (approximately 1-3%) on your house before experiencing it firsthand. However, once we truly understand the role of property tax, we can appreciate how the principle of fairness is deeply embedded in every aspect of American life.
If we were to summarize property tax in one sentence, the most accurate description would be "collected from the people, used for the people." People always want to live better, in pleasant environments, with good public safety, and access to better public services and quality education for their children. In the United States, all of this can be achieved without moving; it simply requires paying property tax.
The primary function of property tax is to increase local government revenue. Compared to the short-term gains from selling land and building houses, this is a very long-term and stable source of income, and it is a major funding source for community development. Property tax is used for various purposes, including municipal services, landscaping, libraries, schools, and public safety maintenance.
The more property tax you pay, the better these public services will be, and your quality of life will improve. Of course, you might say that if you want to improve your quality of life, you can simply move. While that is the quickest method, you must consider housing prices, work, and other living issues. Even Americans, who are accustomed to relocating, are often reluctant to frequently change their long-term residences.
Rest assured, you do not need to worry about whether the property tax you pay is actually being used effectively. Every year, very detailed tax statements are sent to each household, clearly outlining the government's current surplus, expenditures, and how funds are allocated.
Property tax rates vary across different states and regions in the United States, as they are set by state and local county councils based on local financial needs. The government assesses the value of each property and calculates the tax based on that assessment. Property tax in the United States generally ranges from 1% to 3% of the property value, with California's rate being approximately between 0.8% and 2.0%.
Mello Roos Tax (or Community Facilities Districts, CFD)
It is worth noting that in California, in addition to property tax, some newly developed areas are also required to pay Mello Roos Tax, which generally lasts for 20 to 40 years. Mello Roos Tax is typically around 1% of the property value and is primarily used to construct public facilities such as schools, parks, fire stations, and roads in new communities. (Mello Roos is named after the legislator who revised this statute.)
● Mello Roos Tax/CFD is not tax-deductible.
● Paid together with property tax.
● New developments will require payment, and typically, the newer the community, the more it will need to pay.
● The amount paid varies depending on the year the house was built, with Mello Roos Tax ranging from $25 to over $300 per month.
2. Homeowners Insurance in the United States
Homeowners Insurance is a type of insurance that most families in the United States obtain, especially after the subprime mortgage crisis. Naturally, the insurance industry has developed very maturely, and homeowners insurance comes in various types, covering different roles in the U.S. real estate market. It can be categorized by the type of property, such as apartment insurance, or by the role of the insured, such as tenant insurance and homeowners insurance.
Basic insurance generally protects the home from almost all costs except for war, nuclear disasters, floods, earthquakes, and sinkholes, with insurance costs ranging from $800 to $1,600 depending on the area. So, how broad is the coverage?
For example, in the United States, because you own the land, if a passerby slips and falls outside your house, you are liable for the corresponding costs, and at that time, your insurance can come into play. Depending on your coverage amount, you could avoid a significant expense. However, it is important to note that some insurance policies require you to pay a portion of the amount before they will cover the claim.
3. Homeowners Association Fees
Homeowners Association (HOA) fees are similar to property management fees collected in other countries. The HOA is established by the developer, and once the developer sells all the homes in the community, ownership of the association is transferred to the homeowners. This fee is related to the services provided by the homeowners' committee, which typically includes maintenance of common facilities, garbage collection, and upkeep of the exterior of homes. Annual HOA fees can range from hundreds to thousands of dollars. Some luxury apartment communities not only have amenities such as clubhouses, gyms, and swimming pools but also provide additional services such as security patrols and lobby attendants, resulting in higher HOA fees.
Of course, some standalone villas do not have a unified residential area or homeowners' committee, so they do not require HOA fees. However, for such houses, many maintenance tasks must be completed by the homeowners themselves, including lawn care, exterior repairs, and roof maintenance, which can often be quite troublesome.
4. Other Expenses
Miscellaneous expenses, in addition to the aforementioned property tax, homeowners insurance, and HOA fees, also include home maintenance costs, which are primarily used for maintaining the structure of the house, the roof, the lawn, and fire safety maintenance costs.