Housing costs are a giant part of Americans’ budgets and can often hinder couples from saving money for the future. Retirement planning can take a backseat to plumbing repairs, lawn upkeep, and hefty mortgage payments. The more you know about these costs and some ways to reduce them, the more money you’ll have left for saving and investing.
According to Rocket Mortgage, the median mortgage payment in the U.S. was $1,100 in November 2021. The latest median house price is $375,000 (March, 2022). Those costs are just the beginning though, so let’s dig into it.
Saving Money on Your Mortgage
The simplest way to save money each month on housing is to not buy more house than you need. Definitely not more than you can afford. Being house poor is a good way to be poor in every other budget category.
You can cut your payments by taking your time in picking out a house. Being in a rush, regardless of the market, can cause you to make poor decisions. Taking your time always pays off with financial decisions even though patience is hard in a hot real estate market.
Mortgage savings are also available with large down payments. This works on two levels. Mathematically, the more you pay upfront, the lower the house payment. But it’s a boost mentally as well, knowing you’re fully invested from the start of home-ownership. Putting 20% down or more is always recommended.
State Savings
Homes are more costly in some states than others as you can see from this list. The top five states with the least expensive house prices were as follows:
1. West Virginia
2. Mississippi
3. Oklahoma
4. Arkansas
5. Alabama
Of course, when moving to save money, you have to consider all the costs of moving as well. And it’s easier to move at a younger age than at retirement age. Especially far away to a new state.
Hand in Hand with Mortgages
What are other housing costs that go with mortgages? Part of your monthly payment could be for mortgage insurance if you paid less than 20% down. Or if you have an FHA or USDA loan. This type of insurance protects the lender should you fall behind on payments. Not a fun thing to consider but it happens.
Your house insurance is another cost as common as the mortgage payment. This insurance protects you in case something happens to your house:
● Fire
● Smoke
● Theft
● Vandalism
● Weather damage
● Falling tree
According to NerdWallet, the average house insurance costs roughly $1,800 per year in the U.S. Here’s a sampling of prices for states on both coasts and Middle America.
● Florida $2,047
● Maine $1,089
● Oregon $914
● California $1,284
● Nebraska $4,004
● Colorado $2,340
Not only do states vary in house insurance costs, so do companies. So you can save serious money by shopping for the best deal (with solid coverage). Combining auto insurance and house coverage can also save you money with “bundle rates.” But you may have to ask in order to get those rates.
Property Taxes
If one thing gets people upset, it’s property taxes. Because they always seem to rise and it can feel like you never get a home paid for because taxes remain after the mortgage is paid in full.
The average property tax on a single-family home jumped 4.41% in 2020, to $3,719, according to ATTOM Data Solutions. The average is $3,785 as of 2022. The bigger the house and larger the lot size, the more the property taxes will typically be. And unless you live in or want to move to Hawaii for the lowest property tax in America, you’ll have to try other tactics.
Go Local
One option is checking with your local tax assessor to ensure there are no mistakes on your property tax card. You’ll have to go to the trouble of waiting in line at a government office to see if your home and property sizes line up with what their records show. But if you find a mistake, it may save you money and be worth your time.
Keep in mind that this could backfire if the town has your property listed as smaller than it truly is. You could end up with a higher property tax bill.
While you’re at the tax office you can also try option two. Check to see if you qualify for an exemption. Possible exemptions include:
● Seniors
● Veterans
● People with disabilities
● Agriculture properties
● Homestead exemptions
Some news stories report “loopholes” that also give homeowners a chance at exemptions. One example was “ecolabs” in Texas where landowners could save on property tax by allowing research on their land. That one may have been closed, however.
Pick Up the Phone
I’m aware we are in the age of the internet. But you may be surprised at what you can learn by talking to a fellow human. Someone with experience regarding property taxes and or construction.
Call your local property tax official to ask how to lower your yearly bill. And ask about ways to minimize increases if you’re considering adding a room onto your house, a detached building, a deck, or pool. A call to a couple of construction business owners can also alert you to tips to keep your project from causing big property tax increases.
Utilities as Part of Housing Costs
It can take a lot of money to power a house especially if the square footage is substantial, you have a pool, or your kids have no idea lights have an off switch. Electricity is just one part of the utility bill. Add in internet, natural gas, trash pick-up, water, and television services to get the real picture.
Move.org puts the U.S. average utility bill at $370.16 ($4,441.92 per year). Electricity alone is about $114 monthly and streaming services averaged roughly $47. What if you could cut the yearly cost by $1,000? Over ten years, that’s $10,000 you could invest and watch grow for the next 30 years or so.
How to Save on Utilities Though?
Many tips for saving on utility bills are common sense and simply take time to actually use them. But we will also list a few uncommon money-saving tips you may have not considered. Here are the basics:
● Upgrade to a programmable thermostat.
● Insulated curtains help regulate temperature.
● Solar panels are an option but require serious research on actual savings.
● Invest in energy-efficient light bulbs.
● Most older water heaters waste energy.
● Replace air filters every three months.
● Take shorter showers.
● Use rain sensors on lawn sprinkler system.
● Have a professional set automatic sprinkler system for efficiency.
● Use smaller solar panels for battery charging (lawn tools, smartphones, etc.)
Hopefully solar becomes more affordable in the near future. As of now, roof panels can take many years to pay for themselves via utility savings.
Two little-known tips for saving on your utility bill:
● If your utility company offers discounts during off-peak hours, you can save money by using large appliances during those hours (usually late evening into overnight).
● Watering the landscape with greywater or rainwater collection is an earth-friendly way to save money and conserve water. Especially good for regions stricken by droughts.
One more topic and it’s nearly unavoidable…
Home Repairs
Owning a home is a dream. Fixing parts of it can be a bit of a nightmare. Adding shelves in the laundry room is no problem but leaky pipes can mean trouble and a large plumbing bill. Then there are renovations that can cost tens of thousands of dollars. But that’s outside this discussion since repairs can’t be put off and renovations are optional.
We looked at the largest repair costs over at insurance broker Zebra and here are the costly details. A roof replacement will cost about $6,000 on average. However, hail and wind damage are often covered by your house insurance. That’s something many homeowners don’t know and could pay out of pocket when they should check with their insurance company first. Get regular roof inspections by a reputable roofer so you never face a leaky roof.
Termite damage takes a bite out of your household budget. A big one - roughly $7,200 to repair the destruction. Regular inspections are crucial to avoiding this housing cost. It’s wise to do self-inspections for water damage also. Gutters full of leaves are a big cause of rotten exterior wood behind and beneath gutters.
In the $300 range were electrical repair and heating and air conditioning issues. These are two home repairs most homeowners should leave to the pros due to danger and complex systems. Regular maintenance on the heating and cooling system can help avoid major repairs later on.
Wrap Up
Even with the costs of owning your own home, most couples see it as a worthwhile venture. And it’s a great way to start building wealth. You may not face repair costs when renting a home, but every dollar you pay to the landlord is a dollar you could have invested in your own property.
Just be sure to save money where you can on utilities, repairs, property taxes, and the initial mortgage costs. The dollars you save today can turn into your nest egg of tomorrow with steady and sound investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.