Saving tips for homeowners during Covid-19
Buying a home is usually the biggest purchase you will make in your lifetime and maintaining it takes the biggest chunk out of your paycheck. With Covid-19 creating an uncertain economic climate, knowing how to save money on your home is more important and relevant than ever. Here are some tips to help you save money when buying and owning a home.
Your monthly mortgage payments are likely your largest expense. Covid-19 means interest rates are at an all-time low, enabling you to benefit from a low interest rate on your mortgage by refinancing, reducing your monthly payments.
2. Cut out the PMI
Unless you put down at least 20% on your home, private mortgage insurance (PMI) will be included in your monthly mortgage payments and it can crank up the cost significantly. PMI typically costs 0.5% to 1% of the loan amount so if your loan balance is $175,000, you could be paying $1750 in PMI this year alone. One option is to pay 20% down on your home. If you can’t afford to, you could look for a cheaper home or, alternatively…
– Ask your lender to pay your PMI
Getting your lender to pay your PMI is not free – you will agree to pay a slightly higher interest rate in exchange for your lender paying your PMI. However, this increase in interest rate is almost always less than the PMI. Find out more here.
3. Buy a cheaper home
Cheaper doesn’t necessarily mean smaller! Many factors affect house prices including the area, proximity to amenities like schools, etc. Cheaper does, however, mean a smaller down payment, a smaller loan, and less in property taxes and interest.
If you already own a home, you can cut costs by downsizing. Selling your home and buying an inexpensive one, particularly if you have substantial equity, can make your loan amount smaller, reducing the interest you’ll pay and lowering property taxes.
Downsizing also means lower running costs (and less cleaning!).
5. Increase your down payment
The bigger the down payment, the smaller the mortgage and (in theory) the better the interest rate. You don’t have to have a magic money tree or billionaire parents to get a bigger down payment. The easiest way is simply to buy a more reasonably priced home.
6. Reduce property taxes
Property taxes are lower on less expensive homes. If you don’t agree with the valuation of your property, and think it’s worth less, you can ask for it to be reassessed and potentially have your property taxes adjusted downwards to reflect this.
7. Get economical insurance
Does your mortgage include an escrow amount for insurance? You could save money by switching to a cheaper policy. It doesn’t pay to be loyal and sticking with the same insurer year-in, year-out usually results in you paying more. Changing your provider is quick and easy, just make sure your policy meets the lender’s minimum requirements for homeowner insurance.
8. Make extra one-time payments
Most people’s monthly financial situations vary, whether it’s because you spend more over the holiday season, pay less for heating in the summer, or because you receive a surprise tax refund. When you have extra money, consider making extra payments to reduce your loan. You’ll thank yourself for it later.
9. Make regular extra payments
If you can afford to pay more, do. Making regular extra payments might not be the most fun you can have with your disposable income but it can make you big savings in the long-run. If your circumstances change, you can stop paying extra.
10. Modify your loan
If you’re facing financial hardship, talk to your lender. They may be able to modify your loan to help you. This can be through reducing your interest rate, extending your loan term or lowering your monthly payments.
11. Use credit card offers
Credit cards often come with 0% interest offers which you can take advantage of to reduce your mortgage loan interest. Instead of making regular monthly payments to your lender, you could pay a lump sum using your 0% credit card offer like this:
Step 1. Write a check to your mortgage provider for a year’s worth of payments.
Step 2. Put your regular monthly payment aside each month in a savings account and pay the minimum on your credit card from it.
Step 3. At the end of the year, when your promotional rate ends, pay off the remaining balance on your credit card from your savings account and put the rest towards your mortgage.
BEWARE: This tip will only work if you are well-organized and don’t make late payments, so set yourself reminders if you are likely to forget!
12. Lower your running costs
Finally, you can save yourself money by reducing the costs of running your home. This could mean cancelling subscriptions, changing tv, internet or insurance provider, or even little things like cutting your lawn yourself.
iLENDi can help you find a suitable mortgage provider for refinancing, as well as being a hub for homeowner advice and money saving tips.