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The Cost of Upkeep

Mortgage payments are just the beginning.

Editor's note: As a special feature for April, is offering a series of 20 stories on everything you need to know about real estate. Today's installment is Part 9.

How much house can you afford? The answer may be less than you think -- a lot less. And not just because the teaser rates on your adjustable-rate mortgage will inevitably reset, pushing the monthly payments higher. Many prospective homeowners fail to take into account the ongoing costs of maintaining a house and the surrounding property.

If you've been house-hunting lately, you may have gotten one of those flyers real estate brokers like to hand out showing what your monthly payments would be after factoring in the tax deduction for the interest on a mortgage. Don't be fooled. Chances are you will have spent that money long before you get the refund check from the IRS.

Do you have any idea what the monthly utility bills on a 2,400-square-foot house are like? (That's the average size of new construction, according to the 2005 U.S. Census.) Depending on how old and drafty the house is and what part of the country you live in, they could rival your mortgage payments during the colder months.

If your utilities have been covered in your rent, this may be new for you. In addition, you might have homeowner association or condo association dues. You'll definitely have property taxes, and you also may have city or county taxes. While taxes normally are rolled into your mortgage payment, this isn't always the case.

You'll also need to budget for regular maintenance, repair and eventual replacement of your home's major appliances and components, such as the furnace, electrical systems, roof and foundation.

According to a 1997 study by the National Association of Home Builders, annual spending on fuel averages 1.78% of a home's value. Homeowners spend another 0.46% of their home's value on other utilities, 0.50% on maintenance and repairs, 0.48% on property insurance and 1.29% on property taxes, for a grand total of 5.51%.

So if your house is worth $350,000, budget $3,500 for annual operating costs; if it's worth $500,000, plan on spending $5,000 a year; if it's worth $1 million, set aside $10,000.

Steve Melman, the NAHB's director of economic services, says that, in dollar terms, the costs of operating a home have risen since the study was published, thanks to the rising costs of fuel and raw materials. But property values have also risen in the interim, so the costs in terms of percentages of a home's value are probably still accurate.

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The life expectancy of a typical appliance depends to a great extent on how much it is used, but of all the major appliances in your home, gas ranges have the longest life expectancy -- 15 years -- while dryers and refrigerators last about 13 years, according to another NAHB study. Some of the appliances with the shortest life spans are compactors, which last six years, and dishwashers and microwave ovens, which both last nine years.

While that might sound like a reasonable length of time, the appliances in your home aren't necessarily going to be new when you move in, so you may end up replacing them a lot sooner.

Then there are the really big-ticket items. Heating, ventilation and air conditioning systems require regular maintenance in order to work efficiently, but even in the best-case scenarios, most components only last 15 to 25 years, according to the NAHB. The life expectancy of a roof varies widely by the type of material, with slate, copper and clay or concrete roofs lasting more than 50 years, while asphalt shingle roofs last for about 20 years and roofs made of fiber cement shingles last about 25 years.

"If you live in a house that's 100 years old, virtually everything has been replaced," says Frank Lesh of Home Sweet Home Inspection in Indian Head Park, Ill.

Lesh, who is also the president of the American Society for Home Inspectors, says he tells his clients they should budget 1% of the value of their home each year for maintenance. "If your house is worth half a million dollars, you're certainly not going to spend $5,000 on maintenance each year," he says. "But some years, if you need to replace the roof or the furnace, you'll certainly spend more than a few thousand dollars."

These days, people move so often that it can be tempting to defer maintenance, since you may not be around when the furnace blows. But this can come back to haunt you if the buyer has the home inspected: Any problems that show up in the report can be used to negotiate the price down. Lesh says sellers are often incredulous at the results. "People think, 'What are you saying? My furnace works great.' But because it's rusty, because you didn't clean it, it's showing signs of premature wear."

In some cases, a little bit of maintenance can go a long way toward preventing major problems down the road. For example, tree limbs that hang over the roof may sag and rub against the shingles when it rains or snows. They can also provide easy access to your home for pests like squirrels and mice. Simply trimming the branches will reduce a lot of wear and tear.

"Sometimes the life of a component can vary from 15 to 25 years," Lesh says. "There are lots of reasons, such as climate, but you can have the same type of furnace in two houses on the same block and one will last 15 years and the other 25 -- and it's because of maintenance."

Allison Bisbey Colter joined in 2006 from the New York office of Dow Jones Newswires, where she spent the previous seven years covering consumer finance, mutual funds and hedge funds. Prior to that, she worked in Europe for Dow Jones covering transportation from London and Italian capital markets from Milan. She is a graduate of Wesleyan University, where she received a BA in government.