by Emily Hechler 
Owning a home isn’t cheap and you may not always see direct returns on your investment. While many of these expenses are necessary, there are ways to reduce what you pay for essential services. A good guideline to follow is keeping your monthly home-related expenses at 28% or less of your gross income. This guide will help you understand the breakdown of these costs. If you’re currently spending more than 28% of your gross monthly income on home expenses, we’ve also provided tips to help you lower your costs without sacrificing the quality of your services or your safety.
Common Homeowner Expenses and Bills
As a homeowner, you’ll have to pay for many expenses that you might not have to pay as a renter. Many of these bills are mandatory to pay as homeowners. Whether you want to accurately budget your bills or determine if you can afford a home because of these costs, check out this list.
Mortgage – Your mortgage is the loan specifically for your home. Most mortgages are offered with 15- or 30-year loan terms. Each month, you will pay toward the principal and interest. The principal is your initial loan balance, and the interest is the extra charge for taking out a loan. Fixed rate mortgages ensure that your rate won’t change with the market. The amount of money you borrow with your mortgage depends on the size of your down payment.
Insurance – As a future homeowner, you must arrange homeowners’ insurance before you can close on the sale. Private mortgage insurance, or PMI, will also be required if you are making a down payment of less than 20%. Your lender will arrange for PMI if you need it. Your payment will be included with your mortgage payment, so you don’t have to worry about another bill. If your home is in an area prone to flooding, your lender may require you to get flood insurance. Mortgage protection insurance, or MPI is an additional insurance you can add to ensure your family will keep your home if you pass away while paying off your mortgage.
Property taxes – Paying for property taxes is a required expense of being a homeowner. You have two options for paying your property tax. You can pay your tax at the end of the year, when they are due. Or, you can escrow your payment into your mortgage payment. This way, your payment is spread over the entire year, and you don’t have a large bill at the end of the year.
HOA fees – If you’ve previously rented, you may already be familiar with paying HOA fees. Homeowners’ association fees are common in many subdivisions and are usually managed by residents. They primarily serve to maintain the neighborhood’s appearance but can also provide access to local amenities and cover essential services like leaf and snow removal during colder months.
Utilities – Paying for utilities is not unique to being a homeowner. When creating a budget, many bundle water, sewer, electric, gas, trash, and recycling into utilities. Your HOA fees may include some of these utilities, so check with yours to find out what is included. The price of utilities often varies based on how much you use them and how large your home is.
Lawncare – As a renter, you likely had minimal lawncare to worry about. As a homeowner, the responsibility completely falls on you. While you HOA may cover some basic lawncare, you are still paying for it. Your lawncare expenses may include trimming, mowing, fertilizing, and raking leaves. If you plan on living in your home for several years, an irrigation system may be worth the investment.
Home Security – Home security systems aren’t required. However, many find them useful to give them peace of mind for their safety. Different companies offer different security features, such as doorbell cameras, interior and exterior cameras, alarm systems, and more. It’s normal to pay an upfront cost for the supplies and an ongoing cost for the service.
Keeping your home in top shape is important to keep the value of your home stable. While the cosmetics add to the curb appeal, many of these bills are just an essential aspect of being a homeowner that doesn’t help build equity. While this is unfortunate, you can rest assured that your home is taken care of.
Cutting Expenses as a Homeowner
Even though these expenses are often necessary, there are ways for you to receive comparable service for a cheaper cost. Here are some ways you can lower these home expenses.
Refinance your mortgage. If your financial situation has changed since you first got your mortgage, you can refinance your mortgage to reduce your monthly payments. If you are struggling to make your payments on time, you can extend your loan term so your monthly payment is less. If you have an improved credit score and the market has lower interest rates, you can refinance and stay on track to pay off your mortgage according to your original plan. By refinancing your mortgage with a lower interest rate, you can pay the same toward the principal and less toward the interest. This difference in interest can save you thousands each year.
Do your own maintenance. While doing your own home maintenance may require an upfront investment if you don’t have the necessary tools, it can save you money in the long run. It can also be time-consuming initially, but with a little practice, you’ll be able to tackle most tasks on your own. If you’re unfamiliar with a project, you can find helpful tutorials on YouTube to guide you through the process.
Revaluate your home insurance. While home insurance is mandatory, you can possibly reduce your payment by shopping around. Consider bundling your home insurance and car insurance payments. Many companies offer discounts for having more than one type of insurance with them. In addition, you can often get free quotes from other insurers you don’t currently use.
Lower your utility bills. Simple tricks to lower your utility bills can quickly add up. Limit how long you spend in the shower (without compromising hygiene) to save on your water bill. Time how long you keep your sprinkler in the yard. Use LED light bulbs and motion sensor lights to lower your electric bill. Put a timer on your thermostat to adjust the temperature when you aren’t home.
Take advantage of tax deductions. Meeting certain criteria set by the IRS can make you eligible for a tax deduction. In addition, if you work from home, your office space and other bills can also be itemized as a deduction. Make sure you fill out a Form 1040 to get the credit.
Automate bill payments. Many utility and other home service companies offer automated bill payments. By signing up, you may receive a discount on your monthly charge. In addition, you reduce the risk of making a late payment or forgetting about the payment altogether. This can help you avoid late fees and a lower credit score in the long run.
Negotiate bill payments. Even if you follow these steps to reduce your bills, you can still negotiate them with your provider. Apps like Rocket Money will help negotiate your bills for you. While I don’t recommend using the app solely to negotiate the bills, as it may not always be possible, you can still use the app to keep track of your subscriptions.
While these expenses won’t go away while you maintain ownership of your home, you can still make efforts to reduce the cost. If you are ready to take the first step in lowering your bills by refinancing your mortgage, let us know. Our expert team can help you start the process.
Creating an Energy Efficient Home
By following the previously suggested steps, you’re taking great strides to reduce your monthly bills. How do you keep costs down while being energy efficient? While some ideas may cost some money up front, your bills will lower over time. Other ideas are only a Target trip away. Check out this list of energy efficiency tips.
Start a compost pile. Reduce your waste by starting a compost pile. Your organic waste can be repurposed to naturally fertilize homegrown fruits and vegetables. Your food will grow in nutrients in a safe and natural way. Plus, you reduce the amount of trash you have to throw away.
Seal gaps and cracks. Airflow imperfections in your doors, windows, and walls can lead to inefficient heating or cooling in your home. By sealing these gaps, you can lower your energy bills, making it easier to maintain a comfortable temperature. Weatherstripping and caulk work well to seal spaces around windows and doors, while adding extra insulation in your attic and basement, especially around vents and pipes, can further enhance your home’s efficiency.
Adjust your thermostat. Keeping your home at your ideal temperature while you aren’t home can increase the cost of your electric bill. Many thermostats have built in timers you can use to automatically adjust the temperature at certain times. Increase the temperature in the summer and decrease the temperature in the winter. This may seem counterintuitive, but it requires less work from your HVAC system, resulting in a lower payment. Plus, if you have your thermostat on a timer, you can automatically increase the temperature to your liking for when you are in your home.
Unplug your devices. Even if you aren’t using an electronic while it’s plugged in, you are still creating electricity flow and thus increasing your bill. Unplug devices once you are done using them so you are only paying for the electricity you actually use. Another option is to use a smart power strip that can help prevent electric flow too.
Check your air filter. The filter in your HVAC should be replaced every 60-90 days. This helps the unit pump clean air into your home while doing less work. If the filter is dirty, your unit has to work harder to maintain clean air, which costs more.
Install energy efficient windows. If you live in an older home, consider upgrading your windows. Double and triple pane windows are more energy efficient than single pane windows that are often found in older homes. It can be expensive to replace windows, so make sure you shop around and get quotes from different companies.
Plant trees. Large trees in your yard can help reduce the heat in and around your house caused by the sun. The shade can help keep your house cool without requiring as much work from your HVAC.
Get a home energy audit. This list of ideas can help you start creating an energy efficient home. If you want ideas catered specifically to your home, get a home energy audit. Getting a home energy audit from certain auditors can make you eligible for a tax credit. Visit the Missouri Department of Natural Resources to find an eligible auditor in your area for your home.
Property Taxes for Homeowners
An often-confusing part of being a homeowner is paying personal property tax. Here’s a list of common questions about personal property taxes.
What is a personal property tax? Personal property taxes are fees you must pay to your county or city for owning property. This property includes your home and vehicles. Personal property taxes are enforced by the state where your property is located. Personal property taxes are due at the end of each calendar year as long as you still own the property.
Why is my personal property tax so high? Each year, an audit determines the total of your personal property taxes. The county assessor’s office evaluates your home’s condition, type of home, age, and the market value and compares it to the nearby houses. Once they give the property an assessed value, the total is multiplied by the local tax rate to determine how much you owe.
How do I pay my personal property taxes? In the fourth quarter of the year, you’ll receive a bill in the mail for your personal property taxes. This bill includes the costs of each taxable property. This payment is due by the end of the year and can be paid on the Missouri Department of Revenue website. With your home, you can escrow your personal property tax will your mortgage. That way, you pay for the tax throughout the year instead of having a larger bill due during the holiday season. However, you will still receive a bill for the personal property taxes due for your vehicles.
Do I pay for personal property tax if I sell my house? When you sell your home, your personal property tax for the year will be prorated into your closing costs. This means that you will pay for your personal property tax for how much of the year you owned the house. This property will not appear on your bill at the end of the year, since you won’t own it at that point in the year.
Are personal property taxes deductible? You can list your home as an itemized deduction when you file your taxes in the spring if you meet certain criteria. You will have to fill out a Form 1040 in addition to your normal tax paperwork. If you are confused about the process, an accountant can help you determine whether your home qualifies.
Do I qualify for an additional credit? The Missouri Property Tax Credit Claim gives credit to certain senior seniors and disabled homeowners. The credit may be up to $1,100 but depends on the total of the individual’s taxes, household income, and filing status. For more information about the credit or to claim your credit, visit the Missouri Department of Revenue website.
As you prepare to file your taxes, keep this information in mind. As the value of your property fluctuates, so will your taxes.
Conclusion
Owning a home is a personal and financial commitment. While you have ongoing payments like your mortgage, homeowners’ insurance, PMI, and utilities, other bills may have cheaper options. By wisely monitoring your use of utilities and other services, you can save money and even negotiate a better deal. Plus, being proactive with the energy efficiency of your home can ensure your home is up to par for your safety and the planet. While personal property taxes aren’t ideal, they are a necessary expense that comes with being a homeowner. When you’re ready to take the next step in your home and financial needs, contact Alltru for help.
