Guide To Affordable Home Ownership
Buying a home can be one of the smartest financial investments you can make, and that's undoubtedly one of the reasons why you made the move. If you've rented in the past, and only recently purchased your home, you have probably wondered at times why you signed up for such a large, long-term financial obligation. Here are some of the pros and cons:
The Advantages Of Ownership Vs. RentingA house usually appreciates in value
More stable yearly housing costs
Protection against inflation (fixed mortgage rates)
Can save money long-term over renting
Stable long-term investment
Helps you build equity
The Disadvantages Of Homeownership Vs. RentingLong term commitment; less flexibility
Significant upfront costs
Typically more expensive than renting
Maintenance and repair costs are your responsibility
Homeowners insurance required
Associated property taxes
Risk of foreclosure if you don't keep up with your payments
Risk to your credit score if foreclosure happens
The bottom line is that owning and running a home isn't always easy, and the associated costs can often feel like a burden, especially when several expenses all arise at the same time. Over time, though, the benefits are real and substantial.
Fortunately, there are ways for you to minimize the costs and maximize how far your money goes each month.
Review Your MortgageYour mortgage is almost certainly the biggest expense associated with your home, and it should be your first port of call when you are looking to get the very most out of your monthly income.
A mortgage is a long-term obligation, but you do have some flexibility. Even before the end of your mortgage's term, you can refinance your home by negotiating a better deal and replacing your current mortgage with a new one. You don't even need to stick with the same mortgage provider if you don't want to, opening up more possibilities for you to secure a better deal.
Consider refinancing to obtain a lower interest rate or shorter term (or both) to save you money going forward. There's also scope to release some of your equity as cash but think carefully before doing this to make a spontaneous purchase.
You can find out more about refinancing in our Home Refinance Guide, which outlines the different types of refinancing available, and looks at the benefits and pitfalls of refinancing.
Homeowners InsuranceDepending on the terms of your mortgage, homeowners insurance could be something you are required to have. You will have tried to secure the very best deal when you took out your insurance; you might find your premiums increasing due to inflation, increased building costs, and other factors. It's important to review your insurance annually and see if you can get yourself a better deal.
There are several ways to go about this, but here are five you should look at:
Combine policies – Combining your home and auto insurance can save you money, with some companies offering decent discounts if you get both policies with them.
Don't over protect – For example, if you're not living in an earthquake prone area, you probably don't need earthquake coverage.
Raise your deductible – Your deductible is the amount of risk you are willing to accept before the insurance company pays out on a claim. Raising your deductible can lead to significantly lower premiums.
Check your discounts – Ask your insurance provider if you are entitled to any discounts that you are not getting. For example, you should be paying lower premiums if you have smoke detectors, deadbolt locks, or fire alarm systems.
Shop around – Check if your current insurance provider is giving you a longevity discount. If not, shop around to see if other companies out there can beat your existing premium.
Lower Your Utility BillsThere are many ways to reduce your utility bills. Small, simple changes might not seem enough to accomplish much, but they can add up and make a large impact.
Turn off lights when they are not in use; keep your thermostat level to avoid unnecessary heating and cooling expenses; keep your freezer full so that it does not need to work so hard. Make sure you don't have any leaking pipes and take advantage of flow-restricting shower heads. You should also only use your dishwasher when it's full and do full loads of washing in the machine each time, as well. Replacing your appliances with newer, more energy-efficient models can help save you money in the long run. Some state and local governments even offer incentives for replacing old appliances with newer, more efficient ones.
Use Smart TechnologyTechnology can cost money, but it can save even more. Smart devices make your life better and reduce your costs at the same time.
Programmable 'smart' thermostats, for example, keep your home at the perfect temperature all day long. You can set them right from your smartphone on your way home, so the temperature of your property is just right when you arrive, so you don't need to heat or cool your house when you're not there.
Motion sensors can help reduce your utility bills by switching off lights, TVs, sound systems and other electronic appliances when nobody is using them. Some systems even have functionality that lets you control them remotely from a smartphone.
Depending on where you live, solar technology can help save you money in the medium- to long-term. While the upfront investment costs can be high, more affordable solutions are coming out all the time.
Even small additions like solar lights for porches, patios and garden areas can save power and eliminate the need for additional lighting.
Preventive MaintenanceYour homeowner's insurance is very unlikely (unless you specifically pay for coverage) to cover the cost of replacing faulty plumbing or broken appliances. You should look to decrease your chances of being out-of-pocket in the future because of repair or replacement costs by investing some of your time and money in preventive maintenance.
Get into the habit of checking air conditioning units, refrigerators and washing machines to ensure they don't fail and cause a mini disaster in the future.
Seemingly insignificant outdoor repairs, such as cleaning your gutters regularly, can save you a big headache down the road when your roof starts leaking or worse.
Preventive maintenance can cost as little as a few dollars or a few hours of your time in some cases, but the potential benefits can be huge.
The Bottom LineOwning and running a house isn't always cheap. In fact, it represents a significant, long-term financial commitment. Making an active commitment to saving money, taking care of your house, and keeping your life efficient can make a big difference in your budget, especially compared to the cost of just sitting back and letting things happen!
If you are prepared to spend some time looking at the different options and technologies out there, you can start realizing tangible savings almost immediately.