According to the latest Consumer Expenditure Survey from the Bureau of Labor Statistics, housing represents 33.9% of overall consumer spending! This means that housing is by far the most expensive item in most budgets.
This means that a reduction in our housing costs should have a great impact on our overall expenses. Unfortunately, this can be one of the most difficult categories to make immediate changes. There are, however, a few ways in which we can cut our housing expenses. First we’ll look at cost-saving methods for homeowners, and then we’ll turn our attention to renters.
Downsize & buy a smaller home – If your housing costs are too high, selling your home is one of the first things you should consider. If you are able to sell your home and completely pay off the mortgage, this may be a great option for you. If you are facing financial disaster, learn how to sell your house quickly!
This will probably work best for you if you owe far less then the value of your home and can handle accepting a lower offer than what you feel it’s truly worth – due to the currently depressed market. But this will also mean that you will be able to buy another home for far less than what you paid a few years ago.
Combine that with maybe reducing the overall square footage or number of rooms, and your savings should be substantial. Don’t forget about the various financial incentives for homeowners, such as the window tax credit.
Refinance – If you qualify for a lower interest rate on your mortgage, you should consider this option. There a lot of variables to consider when refinancing – such as closing costs, the length of both your current and new loans, the interest rates, points, etc – so you must do your homework before just jumping right in.
However, this is still a popular choice among those seeking to lower their housing costs. Once you get older and your situation changes, you may be interested in a reverse mortgage!
Stop paying PMI – Many homeowners are paying hundreds of dollars each month because they were not able to come up with a 20% down-payment. For most mortgages that were taken out for more than 80% of the value of the property, the bank requires the homeowner to pay Private Mortgage Insurance.
If you currently owe less than 80% of the value of your home and are still paying PMI, contact your mortgage company immediately for instant savings. Also, if you have enough money in savings (“enough” is relative), it may make sense to pay down your mortgage in order to stop paying these fees.
Sell your home & rent – This option will reduce your housing costs more than anything that we’ve listed. Besides the fact that your rent will most likely be less than your mortgage payments, you will have significant savings in other areas such as – taxes, interest, maintenance, insurance, and even utilities!
Downsize & move into a less expensive place – When you are a renter you have less options to reduce your housing costs than a homeowner. However, you can choose to move into a less expensive place. By changing the size, location or even the number of bedrooms, you can find substantial savings.
Find a roommate – If you don’t mind sharing a bathroom or kitchen, a roommate is a great way to reduce expenses. You can share the costs of groceries, utilities and cleaning supplies in addition to the rent.
Negotiate and/or Barter with the landlord – You may be able to reduce your rent by bartering with your landlord. Maybe you are handy and can handle the maintenance of your unit, or you can trade your computer knowledge for a discount in rent. If your landlord has multiple units, maybe you can handle his accounting tasks. You may be able to trade cooking, cleaning or other housekeeping chores for a lower rent.
One thing to remember is that when you move into a smaller house or apartment, the cost of your utilities should decrease as well.
What are some of the ways that you have been able to reduce your rent? Have you ever bartered with your landlord? Have any of you sold your home and decided to rent? What are some other ways to save on housing costs?
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