As the cost of living rises, housing costs can account for over 30% of your household budget. Fortunately, there are things you can do to lower the cost of housing. Below are a few tips.
Refinance Your Mortgage
Depending on prevailing interest rates, your finances, and credit rating, you may be able to refinance your mortgage so that you’re paying less money each month. Even knocking a couple of points off your interest can significantly lower your monthly payments and potentially save you thousands in interest over the life of your mortgage.
Variable rate mortgage – If you have a fixed rate mortgage with a high interest rate, consider your variable rate mortgage options. Since many variable rate mortgages offer low interest for the first few years, you can immediately lower your monthly mortgage cost. But watch out, if interest rates rise, you could find yourself facing a significantly more expensive mortgage payment.
Fixed rate mortgage – If you’re in a variable rate mortgage where the interest rates have risen sharply causing your monthly mortgage payment to skyrocket, switching to a fixed rate mortgage could lower your costs. It’s helpful to refinance when your credit is at its best so that you get the best interest rate available on the market.
Challenge Property Taxes
Many homeowners face high property taxes, especially in cities with booming economies. However, sometimes the property taxes assessed on your home may be inaccurate. You can challenge those property tax assessments and save hundreds of dollars or more. Here’s what you need to do:
- Contact your local tax assessor’s office to get the specific protocols for challenging your property tax assessment. While there are some general guidelines, each municipality is different.
- Get a home appraisal. The first thing you should do, if you’re serious about challenging your property tax assessment, is to get your home appraised. It’ll cost you around $500, but a good appraisal can be used as evidence when challenging your property tax assessment.
- Research similar homes. Create a sales list of homes comparable to yours. You want to show that other homes just like yours in your area are selling for less than the value assessed by the tax assessor. You can get the help of a real estate agent to put this list together for you.
- Write a letter. After receiving a letter stating your property tax assessment, you should respond in writing with your evidence within 30 days. Check with your locale because date requirements may be different in different states.
Once your evidence and letter are received, the tax assessor’s office will respond. Even if they disagree with your challenge, you can appeal and eventually request that a judge hear your case.
Private mortgage insurance is a requirement when your take out a mortgage with less than 20% down. However, in most cases you can remove this insurance (which is quite costly) once your equity exceeds 20%. Your mortgage paperwork should tell you when you will reach the equity threshold required to remove PMI. If you make extra payments, you may be able to reach the threshold sooner and remove your PMI. It’s important to note that removing FHA mortgage insurance may be a bit trickier depending on when you took out your loan. In any case, you can also refinance PMI insurance off your mortgage as long as you don’t take the equity out of your home once you refinance.
Since housing is such a huge part of your budget, taking steps to lower housing costs is critical to creating financial stability.