Your Home Is Draining Your Finances. Here’s What To Do About It…

For most people, their home is the most valuable thing that they own. It is also the most expensive. The average person spends more than half their working lives, merely earning money to pay for all the expenses associated with their property, representing a massive drain on their finances. 

For families, the problem is even worse. Single professionals can get away with renting a small apartment and keeping their living costs low. Parents and children, by contrast, have to live in more extensive accommodation. And that invariably costs a lot more. 

In this post, we’re going to take a look at all the costs associated with running your home. We’re also going to suggest strategies for minimising them, so you have more money for the things you want, like holidays. 

Upkeep 

Houses are, just like everything else, a depreciating asset. Over time, they slowly fall apart, just like your car or washing machine. Keeping them in good condition, therefore, is a necessary expense. 

How much you pay on yearly upkeep depends primarily on the type of home you buy. New houses tend to have the least maintenance costs because everything is modern. Older properties are much more expensive to maintain over the years because more can go wrong. 

Upkeep should cost around one percent of the value of your home. So if you live in a $500,000 property, you should expect to pay around $5,000 on general maintenance. 

Unfortunately, there’s no easy way to avoid these costs. If you have the right skills, you can do some of the upkeep work yourself. If not, you’ll have to pay a handyman to do odd jobs for you. Things like cleaning out the gutters, sweeping the chimney, and repairing loose brickwork are essential. 

Capital Gains Tax

Capital gains tax is something you have to pay whenever you sell an asset worth substantially more than the price at which you bought it. Because house prices tend to rise over time, most people wind up with a taxable capital gain when they come to sell. 

If you’re not sure about the implications of these rules, you should talk to an accounting expert. They can show you how to reduce your tax bill if you decide to move on and buy a bigger home for your family. 

Furnishings

When you buy a house, you’re mostly paying for the masonry, roof, landscaping, and permission to live on a particular patch of land, separate from everyone else. Often, the previous owners throw in some furnishings, but not many. Only rarely do past occupants leave furniture intact, free for you to use. Mostly, they take it to their new home. 

The cost of basic goods, like chairs, sofas, and decor, can add up pretty quickly. They seem cheap on their own but are actually remarkably expensive when you add them all together. Your best bet here is to stick with second-hand goods and charity shop fare if you want to save money. You can also ask people to send you items they plan to throw out, again reducing your overall expense. 

Mortgage Repayments

When it comes to the cost of housing, mortgage repayments are very much the elephant in the room, costing you more each month than practically anything else. 

If you worry about the mortgage costing you a lot of money, you can view it as a type of saving. When you pay it off, some money goes to the bank, but the vast majority of it increases the equity in your home. And the more of that you have, the better. 

Of course, you need to also think about the interest component of your repayments if you want to reduce the cost. Over the course of a typical mortgage, around half goes to the bank. 

Altrua Financial is a mortgage broker. It says that the best mortgage rates should be below 2 percent. If they’re not, you could be paying more than you need. 

Search around for the best deals. Look for lenders who can beat your current mortgage, and then use that to negotiate with your existing provider. If it is considerably cheaper to switch, you might consider doing so to bring your costs down. 

Property Taxes

The type of tax you pay on your property depends on the country in which you live, and the size, location, or value of the house. Rules vary from one place to another. 

Many people prefer to rent because the landlord ultimately has to pick up the tax bill (gathering money from their tenants). As with any fixed tax, there’s not a huge amount you can do to reduce your costs. 

Insurance

Household insurance falls into two big categories: building and contents. Building insurance typically protects you against losses arising from damage to the structure of your home. It’ll cover things like foundation problems, roof repairs, subsidence, and storm damage.

Contents insurance covers everything inside the house, like your furniture, clothes, and electronics.

Insurance prices vary wildly from one provider to another. At the same time, the extent of the coverage itself doesn’t differ all that much. Some policies are expensive, for instance, because they cover bicycles up to a high value. Bikes are the number one target for criminals, so insurers charge higher premiums to cover their risks. If you don’t have bicycles at your property, though, you’re paying for insurance you don’t actually need. Often, you can find opportunities to switch to a cheaper deal. 

Ground Rent

Most property owners don’t have to pay “ground rent,” but some do. Ground rent is a fixed fee apartment and flat owners have to pay for the upkeep of the building that houses their accommodation. The money goes towards things like landscaping, roofing, and other essential maintenance tasks for the whole building. 

If you feel that your ground rent is excessive, you can usually negotiate with the rest of the community. Remember, though, if you reduce fees too much, you might not be able to afford all the maintenance that you need.