Making Changes to Your House? Beware This Surprise Future Cost

One of the big benefits of getting a mortgage loan and buying a home is that you have the opportunity to make the space your own. This means that you can make additions, improvements, or upgrades to your property if you want -- and can afford to pay for these changes out of your bank account or get a loan to make the modifications.

When you budget for a renovation, you're most likely focused on the immediate costs of getting the job done (and how they stack up alongside your mortgage payment and other bills). But you need to be aware that you could actually be increasing your housing costs for years to come. Here's why.

Home improvements could increase your home's value -- and your property taxes

When you improve your home, you will typically need to get permits to do the work in order to be able to move forward legally. If you don't, you could face fines and penalties, and the county could order you to stop the renovations or to undo the work that has been done.

When you apply for a permit, this alerts the county or township that you are upgrading your home. And that could sometimes trigger a reassessment of your property taxes. Since your taxes are based on the assessed value of your home, improving your home and making it worth more could make your bill go up.

This is especially true for upgrades that can have a noticeable impact on your home's value, such as:

• Putting an addition on your home that adds more living space.
• Making permanent improvements to the property, such as installing an in-ground swimming pool
• Making structural changes that add bedrooms or bathrooms to your existing space.
• Adding an outdoor deck or outdoor living space
• Converting spaces to get more square footage, such as enclosing a deck or turning a garage into living space
• Finishing a basement
• Adding outbuildings, such as a shed or a screened porch

The specific increase to your property taxes will vary depending on just how much the county believes your improvements added to your house's value -- as well as on what your tax rates are. The more substantial the improvement to your property, the more likely it is that the upgrade could lead to a big tax bill in the end.

Don't forget to take this ongoing cost into account

If you want to improve your home, you shouldn't necessarily let the risk of increased property taxes deter you from doing so. After all, you want to be able to live in and enjoy your space. But you do need to keep in mind that you could face this added cost and be sure there is room in your budget for it -- especially if you are also borrowing to do the upgrade and will have that monthly bill to contend with as well.

Remember, too, that when your property goes up in value, that increase in taxes can be a permanent one -- so you will be faced with higher taxes than you would otherwise have paid for the rest of the time you live in your home. Just make sure you can afford that -- and that the upgrade improves your life enough to be worth this added bill -- before you move forward with making improvements to your home.