How Can Homeowners Save Money With Today’s High Inflation?
Over the past 2.5 years, we have seen an unprecedented increase in home prices. This was brought on in part by the COVID pandemic and the subsequent lowering of interest rates.
The lower interest rates and pent-up demand for home buying created a perfect storm for prices to skyrocket. The lower interest rates helped people get off the fence to buy a home but with a large number of buyers and a limited supply of homes prices had nowhere to go but up.
Interest rates started to creep back up at the beginning of 2022 due to efforts by the Federal Reserve to fight increasing inflation. This has put a damper on the real estate market by taking many buyers out of the equation because they cannot afford the higher mortgage payments brought on by the increase in rates.
Raging inflation has resulted in increasing prices not only in mortgage payments but also in everyday consumer goods. This has hurt many people by cutting into their disposable income.
So what can we do about it? In this week’s post, I’m sharing 5 ways homeowners can save money so that inflation may not have such a devastating effect on their bank accounts.
5 Ways Homeowners Can Save Money
1) Drop PMI – PMI Stands for Private Mortgage Insurance and is used to help protect the lender if you quit making your mortgage payments. It is usually required when
you have less than 20% equity in your home.
The PMI premium is paid monthly and increases your payments. It can be dropped when your equity exceeds twenty percent.
If you purchased your home near the beginning of the pandemic chances are that with appreciation that has occurred the market value of your home may have increased enough to give you more than enough equity to drop PMI.
You can read more about PMI removal in a prior post I wrote here. By dropping PMI, your mortgage payment will decrease and put a little more money in your pocket.
2) Measure House For Accurate Square Footage on Tax records – One thing I always recommend to homeowners who believe that their property taxes are too high is to make sure the county assessor data is correct.
This starts with verifying the reported square footage. County tax assessors are notorious for having inaccurate square footage and they could be reporting your home as being too big.
The larger your home is the more tax you pay. If your home is smaller than what the assessor shows this could result in your taxes being lowered.
The best place to check is with an old appraisal since you already have the information and it’s free. If you do not have an old appraisal you can always get your home measured.
The cost of a house measurement depends on the size of the house but is well worth it compared to the higher property taxes you may be calling. Call me if you need a house measurement quoted in the Birmingham, Alabama area.
3) Protest Taxes – If the square footage on your home is accurate, but you still believe that your taxes are too high, then you may want to protest your property taxes by
filing a rebuttal.
In addition to the paperwork, you fill out with the assessor you need to provide proof that your home is worth less than what they show. This is typically done with an appraisal by an unbiased third party.
By providing an appraisal proving that your home is worth less than the current assessment your chances of getting your property taxes lowered are increased.
Lower property taxes mean more money for you.
4) Energy Audit – Another way to save money is on energy costs. Inflation has resulted in energy cost increases like everything else. The best way to save money on energy is to take advantage of all available tools.
One of these tools includes an energy audit. This type of study will analyze several different factors including the following:
- A review of energy usage including water and electricity
- A study to determine if there is any energy loss in the home
- Recommendations on lifestyle changes that could positively impact energy usage
- An assessment of heating and cooling equipment
- An audit to determine possible improvements and what impact they may have on energy costs
The study could potentially lead to significant savings that could help you save money on your current utility costs.
It would be wise to also consider possible savings on energy by installing a solar energy system. This could also potentially increase your home’s value if the system is owned vs. leased which does not add any value.
5) File a homestead exemption – The last tip I would like to share to help homeowners save money regards filing a homestead exemption. People are reminded of this when they buy a home, however, it is easy to forget to file for a homestead exemption because of everything else going on with your new house.
By filing a homestead exemption the owner is entitled to a tax break that will end up saving you money on property taxes. Certain requirements must be met regarding the type of property and the amount of time it is occupied.
The property must be the owner’s primary residence which they occupy on the first day of the tax year. There are several different types of exemptions with some relating to age and disability so you should check with your local assessor’s office to see which one you qualify for.
Conclusion
I hope the 5 ways homeowners can save money that I have shared with you here are helpful. With the current high prices and inflation that we are experiencing it’s important to search out and find any way we can to save money. If you have any questions please don’t hesitate to contact me and as always thanks for reading.
#2 is a big one. I am an appraiser and some of the areas in which I cover, the homes are incorrect on the tax record due to different measuring techniques. In some cities, the measurements are rounded up. for example, If a room is 9.1 ft x 9.1 feet, it is rounded up to 10 x 10 feet. 82.81sf compared tp 100sf. Thats 17.79 extra sf you are paying taxes on! Great article.
Thanks for sharing about your area. I can see where rounding up like that can add up and eventually result in paying a lot more in taxes. Making sure that the county has accurate square footage is actually the best place to start because most people have an old appraisal laying around that has the correct square footage which they can compare to the county at no cost.
I suspect there will be many tax appeals next year in my area. My observation is people have pretty much not paid attention to property taxes for many years now. But that’ll change now that prices have changed.
I agree, Ryan. In our area, we had a huge increase in property taxes last year and everybody freaked out. Rightly so. I’m sure I will be busy in the next round of appeals as well. This is a big area where people can save money if they are able to successfully win their appeal.