Most buyers walk into the homebuying process focused on one number: the purchase price. And while that number obviously matters, it is only part of the story. In Southwest Florida, there are costs that show up between contract and closing, and costs that continue every month after you move in, so understanding those numbers is important for your financial health.
Going in with a clear picture of what homeownership actually costs sets you up for a much smoother experience and protects you from financial surprises down the road. Here is a breakdown of everything you should be budgeting for.
What should you expect to pay at closing when buying a home in Fort Myers?
Costs vary between regions in Florida so for our purposes my examples will be based on buying a home in Fort Myers.
As a rule of thumb, homebuyers will pay roughly 2 to 5 percent of the purchase price in closing costs. On a $350,000 home, that is an additional $7,000 to $17,500 due at closing. These costs include your loan origination fee, appraisal, title search, title insurance, prepaid homeowners insurance, prepaid property taxes, and prepaid interest.
When it comes to title insurance, there are two types: lender’s title insurance (for the amount of the loan) and owner’s title insurance (for the amount of the purchase). In Fort Myers it is customary for the seller to pay the owner’s title insurance policy.
Buyers pay for their lenders title insurance, if they are getting a mortgage. Obviously if the transaction does not involve a mortgage then there is no lenders title policy to issue, so cash buyers save here.
Your lender will provide a loan estimate early in the process that breaks all of this down, so review it carefully and ask questions if anything is unclear.
What are your real monthly costs after closing?
This is where Southwest Florida homeownership looks different from many other states, and where buyers need to pay close attention.
For a typical home, homeowners insurance premiums range from $3,000 to $8,000 or more annually depending on the age of the home, roof condition, and location. That adds $250 to $650 or more to your monthly costs beyond the mortgage payment alone.
Flood insurance is another consideration. If you’re buying a home located within the special hazard flood area (aka high risk flood zone), your lender may require you to carry flood insurance as a provision of the mortgage. Requirements depend on the property and financing, so if you plan to mortgage the home, you should confirm this with your lender. Even if you don’t plan to mortgage the property, you may still wish to carry flood insurance. The lower the risk of flooding, as determined by FEMA flood zones, the lower the annual premium to carry a flood insurance policy.
Property taxes are based on your home’s assessed value and millage rate. While you can use the rule of thumb that they will typically run about 1 to 1.5 percent of the purchase price in Fort Myers, that isn’t always the case. So it’s important to obtain a property-specific estimate reflecting the purchase, reassessment and applicable exemptions.
Pro Tip: I can show you where to find a calculator on the Lee County Property Appraiser’s website so you can estimate your property taxes of any house in the county.
Making the property your primary residence and applying for the Florida homestead exemption can reduce your taxable value by $50,000, which is a saving worth taking advantage of, if you qualify.
HOA fees vary widely across communities, ranging from nothing at all to $800 or more per month in gated or master-planned communities. Add in amenities like bundled golf and the fees go up from there. Always confirm the fee and ask whether any special assessments are on the horizon before you make an offer.
Maintenance
A good rule of thumb is to set aside 1 to 2 percent of your home’s value per year for routine upkeep. Budgeting $290 to $580 per month for things like HVAC servicing, pest control, landscaping, and general repairs. In Southwest Florida, air conditioning systems, roofs, and pool maintenance deserve particular attention given the heat, humidity, and storm season that come with living here.
What does the full picture look like?
Let’s say you want to purchase a home in Fort Myers for $600,000. with 20 percent down payment and a 30-year mortgage at a fixed 7% interest rate.
Your monthly mortgage payment would be $3,193.45 for principal and interest.
- Purchase price: $600,000
- Down payment (20%): $120,000
- Loan amount: $480,000
- Interest rate: 7% fixed
- Term: 30 years
Property taxes, homeowners insurance, flood insurance, and HOA fees would be additional.
- Property taxes: approximately $6,700 to $9,200 per year depending on millage rate and homestead exemption status.
- $7,215 per year for a home in Fort Myers (outside of Fort Myers city limits, but with a Fort Myers address) at a 13.3623 millage rate / $6,679 per year with homestead exemption
- $7,890 per year for a home in Alva (outside of Fort Myers city limits, but within Lee County) at a 14.6213 millage rate / $7,292 per year with homestead exemption
- $9,163 per year for a home within Fort Myers city limits at a 16.97 millage rate / $8,447 per year with homestead exemption
- Homeowners Insurance: estimate at $2,000 per year for a newer home with full wind credits / $10,000 per year for an older home without wind credits
- Flood Insurance: estimate $600 per year for an optional policy for a home in X zone, outside of the special hazard flood area / $12,000 per year for a high risk policy
- Homeowners Association Fees: $0 for homes not located in an HOA / estimate $350 per month for homes with irrigation, lawn care and landscaping included and a gated entrance with a basic clubhouse / estimate $1,000 per month for an amenity-rich community with bundled full golf and tennis, restaurants, sports courts, and full maintenance of lawn care and landscaping with high-speed internet and concierge services.
That is the number worth stress-testing against your budget before you start shopping, not just the mortgage payment on its own.
Watch my full YouTube playlist for more tips when buying a Florida home by clicking here.
Understanding the true cost of buying a home in Southwest Florida before you start the process puts you in a far stronger position as a buyer. If you want to talk through what these numbers look like for your specific situation, reach out to me directly and I am happy to walk you through it.