Homeownership costs are on the rise all over the country – and especially in large urban markets. Savvy homeowners are learning the value of reducing the cost of homeownership through strategic cost-cutting methods.
The True Cost of Homeownership
If you’ve ever spent time renting a house or apartment, you’ve likely been told by at least one person that you’re throwing money down the drain. “You need to buy,” they tell you. And while there is some truth to this – renting does nothing to build equity – it’s not as cut and dry as it’s made out to be.
When people eventually do take the plunge into homeownership, they come to realize that there are extra costs and expenses that come with owning a house. By one estimate, the median cost people pay nationwide to own a home is 54 percent more than the median cost to rent each month.
Owning a home brings a number of expenses into the picture – including property taxes, mortgage interest, homeowner’s insurance, maintenance and repairs, renovations and upgrades, HOA fees, and utilities. When you layer these costs onto the rising cost of real estate, homeownership can get very expensive very fast.
Clever Ways to Reduce Ownership Costs
On the surface, homeownership can look unrealistic to millions of Americans. Many of those interested in buying are waiting until a later date. Many more who currently own homes are wondering if they can continue to make ends meet.
Despite the unique nature of every situation, homeowners all over the country are discovering there are plenty of practical ways to reduce ownership costs and enjoy greater financial freedom.
Here are some of the methods and techniques they’re using:
- Make a Larger Down Payment
On the surface, a zero-down or 3.5-percent down home loan sounds like a fantastic deal. You get to move into the home of your dreams without paying a lot of cash on the front end. But what you may not realize is that such a small down payment requires you to pay private mortgage insurance (PMI).
PMI is an insurance policy that lenders use to protect themselves on loans where the buyer doesn’t make a down payment that’s equal to 20 percent or more of the home loan value. The cost is typically 0.5 to 1 percent of the entire loan amount on an annual basis. In other words, the PMI on a $200,000 loan can cost as much as $2,000 per year – or $167 per month. If you’re able, making a 20 percent down payment will save you a significant amount of money.
- Conduct an Energy Audit
Energy inefficiencies can be extremely costly. In fact, you may be losing thousands of dollars a year as a result of simple problems that can be corrected with relative ease. To find out if your home has any of these issues, conduct an energy audit.
“Professional energy assessments generally go into great detail to assess your home’s energy use,” Energy.gov notes. “The energy auditor will do a room-by-room examination of the residence, as well as a thorough examination of past utility bills. Many professional energy assessments will include a blower door test. Most will also include a thermographic scan.”
Depending on the results of your audit, you can determine which projects and fixes make the most sense for your home. Even making just a couple of changes or upgrades can make a big difference.
- Try Solar Power
Energy costs can really add up over the years. An inefficient system can cost you thousands of dollars over the life of ownership. If you know you’re going to be in your house for a few years, you may consider investing in solar power.
While it might not have been feasible for you a few years ago, solar power has become much more cost-effective in recent months. Not only have the technology costs gone down, but there’s actually a federal tax credit that allows you to get 30 percent back on the total cost of installation.
- Shop Around
Most homeowners spend too much on home services and policies. Typically, this overspending is the result of laziness or a lack of awareness. If you want to save on things like cable, internet, home insurance, and your mortgage, shop around and compare offers. You’ll be shocked by how much discrepancy there is from company to company.
- Invest in Low-Maintenance Landscaping
Unless you’re someone who has a particular affinity for landscaping, you probably don’t have much interest in maintaining a lot of grass and demanding plants. By investing in low-maintenance landscape design, you can save yourself time and money.
One option is to install rock gardens, instead of typical mulch beds. As gardener David Beaulieu writes, “Rock gardens typically contain drought-tolerant plants that don’t need much care. Moreover, the rocks, themselves offer a decor that never needs to be watered or tended to in any way whatsoever.”
Stop Bleeding Money
Homeownership doesn’t have to bleed your income dry every month. You should be able to build equity without tossing every last dollar down the drain. The key is to be strategic with your methodology and continually look for ways to reduce costs and save. As homeowners all over the country are showing, achieving affordability is anything but an impossible feat.