Buying your first home is an exciting step. It’s one of those quintessential adult experiences that makes you feel accomplished. However, just because you’ve signed a bunch of documents at the closing table doesn’t mean you’ve made it. Homeownership is a long-term responsibility that requires time, money, energy, and a hefty amount of tender loving care.
You’ve purchased a house, but you’ll eventually make it your home. As you attend to your home’s needs, you’ll find yourself renovating, replacing, fixing, and even adding on. As you do so, you want to make sure you don’t waste your money on low-returning projects, services, and expenses that don’t matter much in the long run.
The 6 Ways New Homeowners Waste Money
As homeowners, we all have our own styles, preferences, and needs. With that being said, there are some pitfalls that we can all encounter.
Here are a few of the most common ways new homeowners waste money within the first few months of ownership.
1. Private Mortgage Insurance (PMI)
You might be wasting your money before you even cross the threshold of your new front door for the first time. How so? Many first time homeowners don’t make a very substantial down payment. As a result, they end up having to pay what mortgage companies refer to as “private mortgage insurance,” or PMI.
“If you’re only putting, say, 5% down on your mortgage, that basically means that the bank you’re borrowing the money from is taking on 95% of the risk of the loan,” Quizzle explains. “Most banks are uncomfortable with this and will require you to purchase PMI to protect them in the event that you don’t pay on your mortgage.”
While it can vary depending on the provider and terms of the loan, PMI generally costs one percent of the loan amount per year. If your home costs $200,000, this means you’re paying $2,000 per year in PMI, or $167 per month. By making a down payment of at least 20 percent, you can avoid PMI altogether and keep more money in your account.
2. Poorly Selected Home Insurance
In the craziness that comes with putting in a home purchase offer, reaching an agreement, scheduling inspections, and agreeing on a closing date, something that often slips under the radar is home insurance. As a result, most people pick the easiest option (which is rarely the most cost-effective option).
It’s really important that you shop around for home insurance. Rates can vary rather dramatically from provider to provider. By doing your research, you may be able to save hundreds of dollars per year.
3. Brand New Furniture
If you’re coming from a small apartment or have been living with friends and family for the past few years, you’ll find that you suddenly need a lot of furniture to fill up your new home. You’ll also discover that brand new furniture is incredibly expensive.
A single room in your home could cost a few thousand dollars to furnish. Multiply that across bedrooms, living areas, the dining room, kitchen, and porches and suddenly your decision to buy a home looks a lot more expensive than you first anticipated.
While brand new furniture is sometimes what you need, don’t dismiss the idea of gently used furniture. There are plenty of secondhand stores, online marketplaces, and discount floor rooms to shop. You have plenty of time to fill up your home. Take things slow and figure out what’s most important.
4. Monthly Lawn Care
One of the burdens that comes with homeownership is lawn care. Suddenly, you’re the one who has to handle mowing the lawn, pruning shrubs, planting flowers, raking leaves, and pulling weeds. And since most people don’t find these tasks very exciting, hiring a professional lawn care service seems to be a good answer.
While professional lawn care services can do a good job, they come at a cost. If you were to pay someone to come out and take care of your yard a couple of times per month, you’re looking at $100 to $200 per month. There’s something to be said for doing it yourself and saving the money (if your schedule permits).
5. Long-Term Security Contract
In today’s world, you can never be safe enough. No matter how quiet your neighborhood seems, there’s always the risk of burglary and property crime. Security companies sell alarm monitoring services, security cameras, and other technology to help homeowners protect their homes and enjoy peace of mind. While home security is great, you want to avoid getting yourself locked into a long-term agreement.
Many security companies require you to sign up for contracts that last three, five, or even seven years. That’s a long time to be tied down to a service that you’ve never used before. Be careful when these salespeople come by. Do your research and try to find an option that’s less binding.
6. Energy Inefficiencies
One of the first things you should do after buying a home is to go around and perform a manual check of doors and windows. Run your hand along the edges and feel for warm or cold air (depending on the season) coming from outside. A small leak might not seem like a big deal, but it can impact your monthly energy bills rather significantly over time.
Thankfully, you can fix energy efficiencies rather effortlessly. All it takes is a little weather stripping or caulk and you’ll have these problems fleshed out. On a related note, now is a good time to check out your hot water heater and bump it down a notch or two. Lowering your hot water heater even just a few degrees can save you hundreds of dollars per year.
Contact Green Residential Today
At Green Residential, we’re one of the most trusted names in the Greater Houston real estate market. From residential real estate buying and selling to property management, we do it all. For more information on our services and the different ways in which we work for our clients, please don’t hesitate to reach out and contact us. We would love to assist you in achieving your personal and financial goals.