4 Tips Homeowners Can Use to Save Money

As a homeowner, you’re always looking for new ways to save money so you can maximize your monthly cash flow, save, and invest. But knowing where to cut back isn’t always easy. You might need to get creative!

Here are some of our favorite ideas:

1. Be Smart With Financing 

When it comes to the cost of home ownership, financing can be one of the more expensive factors. But depending on how you approach the structure of your financing, you may be able to save a significant chunk of change (or at least reallocate some of your money).

While different rules apply in different areas, there are a multitude of financing options. For example, offset loans help borrowers reduce the interest they pay on home loans so they can pay it off faster.

By linking an offset account to your home loan, every dollar you contribute is “offset” against the remaining balance on your home loan. As a result, you’re only required to pay interest on the difference. 

2. Accelerate Your Payments 

The bank tells you what you’re required to pay each month in order to keep your account current. This is your monthly mortgage payment. But almost all lenders permit borrowers to make extra payments towards the principal loan balance. And though it might seem small and insignificant at first, the results compound over time.

“The benefit of paying additional principal on a mortgage isn’t just in reducing the monthly interest expense a tiny bit at a time,” Bankrate explains. “It comes from paying down your outstanding loan balance with additional mortgage principal payments, which slashes the total interest you’ll owe over the life of the loan.”

While you can write in any amount you want on your monthly mortgage payment and speed up the down payment process, one easy option is to simply make an extra payment each year. You can do this by taking your monthly mortgage, dividing it by 12, and adding that amount as additional premium each month. Or, you could make one additional lump payment each year. (Some people do it when they receive their tax return in the spring.) 

3. Emphasize Energy Efficiency 

According to the U.S. Department of Energy, the average household can save somewhere around 25 percent on their monthly utility bills when accounting for efficiency measures. This amounts to roughly $2,200 per year.

To maximize your energy efficiency, you have to emphasize the right investments.

• Make the switch from traditional incandescent bulbs to LED lighting and use 75 to 80 percent less energy per bulb. This can save you several hundred dollars per year (when extrapolated across dozens of bulbs). 

• Upgrading from old energy hogs to newer ENERGY STAR appliances can reduce energy consumption by as much as 25 to 40 percent. For best results, focus on the water heater, dryer, and dishwasher. 

• You can save as much as 30 percent annually on your utility bills through a strategic combination of HVAC upgrades – including AC units and furnaces, insulation, and thermostats.

Upgrading lighting, appliances, and HVAC will cost you upfront, but as long as you’re planning to remain in the house for a certain period of time, the savings will justify the investment. It’s all about being strategic in when and how you make these tweaks. 

4. Rent Out a Spare Bedroom 

What if you could turn your home into a source of income for you and your family? One option is to rent out a spare bedroom on a periodic or long-term basis.

Whether through Airbnb or as part of a long-term lease agreement, renting out a spare bedroom can allow you to generate thousands of dollars per year. That’s money that can be used to offset your mortgage payment and/or bolster your savings and investments. 

Become a More Savvy Homeowner 

Owning a home comes with its pros and cons. And while there are certainly expenses related to home ownership, the advantages should outweigh the risks. However, you’ll have to be strategic with how you approach issues like financing, home improvements, expenses, and monthly cash flow. Start with the tips outlined in this article and go from there. The right combination of tactics could potentially save you thousands of dollars every single calendar year.