Drowning in homeowner bills? Here's how to find some savings.
The expenses you incur as a homeowner extend well beyond your monthly mortgage payments. But some of those expenses may not be set in stone. Here are three home expenses you may be able to lower.
1. Property taxes
Your property taxes are calculated by taking your home's assessed value (usually the amount an assessor thinks it would sell for) and multiplying it by your local tax rate. You can't change the latter -- your tax rate is established by your municipality. But you can argue that your assessment is too high. And if you win that argument, you lower your property tax bill.
Each year, you should get a notice of assessment from your municipality, and instructions on what to do if you disagree with that estimate. If you appeal, you could shave serious money off your property taxes.
Say your home is assessed at $400,000, but you dig up data on comparable homes in your neighborhood that recently sold for $350,000. Let's also assume your tax rate is 1%. If you knock your assessment down by $50,000, you save $500 on your tax bill.
2. Homeowners insurance
The amount you pay for homeowners insurance depends on the location of your home, its size, and its layout. But you can sometimes lower your homeowners insurance premiums.
Consider safety features. A modest investment in an alarm system could mean you pay less for insurance (on average, homeowners save up to 20% on their premiums). Next, try bundling your auto and homeowners insurance. If you use the same company for both, you might snag a discounted rate.
3. Private mortgage insurance
Private mortgage insurance, or PMI, is a premium you pay when you don't make a down payment equaling at least 20% of your home's purchase price. PMI usually equals 0.5% to 1% of your mortgage amount -- if you borrow $200,000, you pay $1,000 to $2,000 a year for PMI. You can get rid of PMI, however, by making extra payments toward your mortgage so that your loan balance drops to 80% of your home's value.
To be clear, your lender automatically removes PMI when your loan balance falls to 78% of your home's value. But if you ask the lender to remove it when you reach 80%, the lender should comply.
Owning a home can be expensive -- but you can take steps to lower your costs. Make the above moves, and you could free up lots of money for savings and other bills. Just as importantly, you can alleviate financial stress.
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