Finances – Homeowner Savings

Homeownership Investment

Homeownership has always been part of the American Dream. Because of that, many people accept owning a home as the right, even obligatory thing to do without considering the benefits and the risks. If you are contemplating buying a home, you should know and review the pros and cons of the investment you are about to make—as you would any investment decision—before signing on the dotted line.

Attractive Long-Term Investment

Appreciation represents the increase in home values over time. Real estate prices are cyclical, and homeowners shouldn’t expect the property’s value to increase drastically in the short-term. But if you stay in your home long enough, there’s a very good likelihood you will be able to sell your home for a profit because of appreciation later in the future.

In fact, buying a home is one of the best long-term investments you can make.
Despite some dramatic dips, such as that in 2008-10, residential real estate tends to rise in value. According to the Federal Reserve Bank of St. Louis, the average price of sold houses in the U.S. rose from $340,400 in Q3 2014 to $382,700 in Q3 2019—over 10% increase in value over five years. Go back a decade, when the average home fetched $274,100 (Q3 2009), and you have a 39% increase. That’s not a bad return on an investment that also provides you with a place to live.

Real estate appreciates primarily because of the land on which the home sits, while the actual structure depreciates as time goes by. So the expression “location, location, location” is not just a real estate catch-phrase, but a very important consideration when buying a home. The neighborhood with the amenities it brings—school districts, parks, condition of roads, etc.—and the city where the home is located all factor into the property’s appreciation.

Consider a home that is rundown and dilapidated to the point that it’s uninhabitable. The land underneath the home may still be worth a significant amount of money—more than the residence, in this case,. A seller may consider selling it as is—with the structure still intact—or spending a little extra to demolish the home and sell the land at a higher price on its own.

Illiquidity

Unlike stock, which can be sold within a matter of days, homes typically take much longer to unload. The fact that you may have access to $500,000 in tax-free capital gains doesn’t mean you have ready access. Meanwhile, you still must make mortgage payments and maintain the house until you sell it.

Building Equity

Home equity represents the difference between how much you still owe on your mortgage and the market price or value of your home. Home equity and appreciation may be considered together. As noted above, your home is likely to grow in market value over time. Your equity also grows as you pay down your mortgage, with less of your payment going toward interest and more toward lowering the balance on your loan.

Building equity does take some time because it takes time to lower the principal balance owing on the mortgage loan—unless, of course, you make a large down payment or regular prepayments. One thing to keep in mind, though, is that the length of time you have your home is a big factor in how much equity you build and the appreciation you can realize. The longer you keep it, the more equity you obtain.

As you pay down your mortgage and reduce the amount you owe, without realizing it, you are saving as the value of your home is increasing—just as the value of savings account increases with interest. When you sell, you will likely get back every dollar you paid out and more, assuming you stay in your house long enough. Over time the average 6% return (interest rate) on your savings should more than
cover your outlay.

Another plus: Home equity provides flexibility to get a loan that is tied to the amount of your home equity. Many investors follow their home equity and home appreciation simultaneously. If an investor believes their home value is greatly appreciating they may put off a home equity loan to have a better opportunity to realize seller’s appreciation.

Location, Location, Location

While paying down your mortgage works the same no matter where you live, market-value growth varies with location. According to the Federal Housing Finance Agency (FHFA) House Price Index (HPI), real estate prices rose an average of 32.88% over the five-year period ending Dec. 31, 2019, in the U.S. overall. However, prices in the Middle Atlantic census division rose only by 23.21%, while prices in the Pacific census division climbed by an average of 40.39%

Capital Gains Exclusion

Eventually, you will sell your home. When you do, the law allows you to keep the profits and pay no capital gains taxes. Well, not necessarily all the profits. There’s a tax-free profit of up to $250,000 for single homeowners and $500,000 for married couples. This is for your main residence only—not for a second home or vacation property.

There are a few requirements you need to meet in order to qualify for this exclusion. You must own the home for at least two years—24 months—within the last five years up to the closing date. The residence requirement dictates that you should have lived in the home for at least 730 days, or two years, during the five-year period leading up to the sale. The final requirement, the look-back requirement, outlines that you didn’t profit from selling another primary residence during the two-year period leading up to the most recent sale.

Tax Deductions

After appreciation, the benefit of homeownership that is cited most often is tax deductions or savings. When you buy a home, you can deduct some of the expenses of owning that home from the taxes you pay to the government. This includes mortgage interest on both your principal residence and a second home, which can amount to thousands of dollars per year.

Interest on home-equity loans or home-equity lines of credit (HELOCs) is also deductible if the funds are used to substantially improve your home.

You can also deduct up to $10,000 in state and local taxes (SALT), including property taxes.

Pride and Financial Responsibilities

One often-cited benefit of homeownership is the knowledge that you own your little corner of the world. You can customize your house, remodel, paint, and decorate without the need to get permission from a landlord.

Ownership comes with responsibilities, however. You must pay your mortgage or risk losing your home and the equity you’ve built. Maintenance and upkeep are your responsibility. You can’t call the landlord at 2 a.m. to have a leaky water pipe repaired. If the roof is damaged, you must repair it—or have it repaired—yourself. Lawn mowing, snow removal, homeowners insurance, and liability insurance all fall on you.

The Tax Cuts and Jobs Act’s Effect

The Tax Cuts and Jobs Act, passed in December 2017, made substantial changes to the parts of the tax code that have to do with homeownership. Unless a future Congress amends the law, all provisions will expire after Dec. 31, 2025. But for now, changes in that law have reduced the value of owning a home.

The law limits mortgage interest deductions to $750,000 of total mortgage debt, including for a first and second home and any home-equity or HELOC loans. The previous limit was $1,000,000 in mortgage debt plus an additional $100,000 in home-equity debt.

There is an exception allowing $1,000,000 in total mortgage debt if you bought your home on or before Dec. 14, 2017. This provision even applies if you refinance that older mortgage. Home equity loan interest is only deductible if the money is used for substantial improvements to the home on which you took out the loan. Previously, interest on up to $100,000 was deductible no matter how the home-equity money was used.

The law also set the SALT deduction limit to $10,000. Previously, all SALT payments were deductible, unless you were subject to the alternative minimum tax.

Other new provisions include restrictions on claiming casualty losses except for federally declared disasters. The moving expenses deduction no longer exist except for the active-duty military moving for reasons of work.

All these changes have lowered the value of owning a home—including the fact that, with the doubling of the standard deduction (another feature of the Act), fewer people will have enough deductions to file Schedule A instead of taking the standard deduction. So the fact that you are eligible for a tax deduction does not mean that it will end up being useful to you. The severe limiting of the SALT deduction will be particularly detrimental in lowering available deductions for people who live in highly taxed states.

High Upfront Costs

The cost of investing in a home can be high—there’s more to your expenses than the property’s selling price and the interest rate on your mortgage. For starters, you can expect to pay anywhere from 2% to 5% of the purchase price in closing costs. Some of the most common closing costs include an application fee, appraisal fee, attorney fees, property taxes, mortgage insurance, home inspection, first-year homeowner’s insurance premium, title search, title insurance, points (prepaid interest), origination fee, recording fees, and survey fee.

Experts say you should plan to stay in your house at least five years to recover those costs.

Potential Depreciation

Not all homes grow in value. The housing crisis of 2008 resulted in many homeowners being underwater, which means owing more on your mortgage than your home is worth. It doesn’t take a housing crisis for home prices to stagnate or drop. Regional or local economic conditions can result in home values that don’t keep up with inflation.

Remember, as well, that the actual structure you live in will depreciate over time. This can be due to wear and tear on the property, or a lack of maintenance and repairs.

The Bottom Line

A home is an investment that comes with many investment benefits but also risks, which makes it an investment that is not for everyone. Weighing the investment benefits against the risks is important. A rational comparison of pros and cons can help you decide whether to put your money into a home investment or potentially find better returns elsewhere.

Disadvantages of Renting a Home

Understanding the pitfalls of renting can help you make an educated choice for your family. Although many renters often believe it cost less to rent than to buy, buying a home can be 45 percent cheaper than renting, reports Jed Kolko, chief economist at Trulia, in a Huffington Post column. Renting is an affordable alternative if you desire the flexibility or can not afford up-front costs, but understanding the disadvantages can help you better weigh your options.

No Financial Incentives

Giving up renting also has financial incentives. Not only will you have stable residency and a chance to build equity, but you can receive savings and tax credits for becoming a home owner. Over the course of six years, the average homeowner’s monthly payment will be less than a tenant’s monthly rent, according to Ginnie Mae. The government also provides tax incentives for homeowners. Interest on a house loan is tax deductible as are property taxes. Other perks of homeownership include the exclusion of profits from capital gains and energy-saving rebates or tax incentives from companies or your state government if you install green appliances.

No Equity

Monthly rent payments consist of money that is not being invested in long-term security nor is it building up savings. Homeownership, despite popular opinion, is an equitable long-term investment. Like any investment, it has risk, chiefly with the value of the property and house. You can take steps to increase the value of your home and property and decrease risk. If you choose a location where new construction or growing economic activity is occurring, the property value increases. If you invest in renovating your home, your house value also goes up. If you are renting, any changes you make toward the house increases the value of the landlord’s property. If new shops open near your apartment, the property value will increase, and eventually so will the rent price.

Instability

Your family is living in a rented house on a temporary basis. Any infraction allows a landlord to remove you with a 30-day notice . Plus, he can kick you out if he wants to sell the property. As inflation pushes up the cost of living, your rent goes up as well. Even apartments in affordable housing programs can raise monthly tenant rent over changes in a tenant’s income or changes in a utility analysis. Homeowners are permanent residents and their family will not be forced to leave unless their mortgage defaults. Fixed rate mortgages offer stability to homeowners who can not afford purchasing a home upfront. Fixed rate mortgages are comprised of consistent monthly payments, regardless of the economy or your paycheck.

Regulations

Many apartments will not allow for any renovations or major decorative changes to their units or houses, such as changing counter tops or painting the walls. If you choose to buy a home or unit space, you can customize the look of your space with no regulations. You can renovate a room or the entire house to make your home more valuable or more livable. Some apartments also do not allow smoking or animals and have restrictions on the amount of people on a lease. If you own your own home, you can have anyone or any pet living with you.

Being a Homeowner: Struggling with Mortgage

If you are now struggling to make your mortgage payments, you’re not alone. According to RealtyTrac, 1 in every 2,253 homes is in foreclosure. In New Jersey, it’s 1 in every 1,043 homes; in Ohio, it’s 1 in every 1,503 homes.1 And with the novel coronavirus pandemic leading to rising levels of unemployment and income loss, you may feel that you’re also on the fast track to becoming another foreclosure statistic. Know that the federal government is suspending all evictions and foreclosures until the end of April. And if your mortgage payment issues are related to COVID-19, both Fannie Mae and Freddie Mac, which together guarantee more than two-thirds of all mortgages, are offering assistance to those financially struggling due to the fallout of the virus.

Whether your trouble meeting your mortgage payments is coronavirus-related or not, the first thing to do is to call your loan provider. If you can, try doing this before missing payments, as this will keep the largest number of options available to you. Here, experts lay out different options for when you’re struggling to pay on time.

Solution #1: Refinance to Change Your Interest Rate Terms

Refinancing to an adjustable rate mortgage (ARM) is a viable option if you’ve almost finished paying off your mortgage. “More and more consumers recognize the financial benefits an adjustable rate mortgage can provide under the right circumstances,” says Hensling. A perfect example is a homeowner who anticipates selling their home in the next three years and currently has a $400,000 fixed rate loan at 4.25% paying $1,976.76 per month.

Hensling says if the homeowner refinanced to a hybrid adjustable rate mortgage fixed for five years at 2.875%, this would reduce the monthly payment to $1,695.57 per month and save $281.19 per month.

Jeremy Brandt, CEO of WeBuyHouses.com, agrees, adding, “If a home is nearly paid off, the vast majority of the monthly payments are going to equity and not interest. Refinancing to an ARM might solve short-term cash flow issues by reducing the monthly payment at the expense of subsequent payments.” That being said, if interest rates start increasing, the monthly payments may increase over a period.

Alternatively, if you have an ARM, switching to a fixed rate mortgage may not lower your current monthly payments, but it can stop your payments from growing. “This makes sense if current fixed rates are lower than the ARM interest rate, or if you expect to move later than the next three years,” says Brandt. However, he warns that if you’ve been in an ARM for a while, the fixed rate you refinance into may be higher than your existing rate and this can cause your monthly payment to go up.

Solution #2: Request Mortgage Forbearance

Both Freddie Mac and Fannie May released guidelines for mortgage forbearance related to COVID-19. Essentially, they each are providing mortgage forbearance to borrowers financially affected by the novel coronavirus for up to 12 months. That means that individuals can reduce or suspend their payments for that time. Additionally, any related mortgage delinquency won’t be reported to the credit bureaus, so missing payments won’t tank your credit score. After the forbearance is over, lenders will work with borrowers to modify loans to lower monthly payments as necessary.2 3

Solution #3: Refinance to a Longer-Term Loan

Spacing your loan out over a longer period is one option that can reduce your monthly payment amount. Refinancing to a longer-term loan is the simplest way to reduce monthly mortgage payments, especially when cash flow is a problem, according to Al Hensling, president of United American Mortgage in Irvine, Calif.

However, it’s important to note that your interest rate will increase. To offset this, Matt Hackett, underwriting and operations manager at New York-based Equity Now, recommends making higher payments to increase the speed at which you pay down the principal. The majority of mortgages have no prepayment penalty (though you should definitely check yours).

Solution #4: Modify the Loan

A loan modification is an alternative for those who cannot refinance their loan but need to lower their monthly house payment. But, unlike a refinance, it requires a hardship. Pierce says borrowers must show the lender that as a result of a financial hardship, they are not able to continue making the regular monthly house payment. “This process involves extensive paperwork that must be completed and sent to the lender for review,” says Pierce.

She recommends that homeowners get counseling through a HUD-certified organization to fully understand their options and get help contacting the lender. “However, not all lenders offer loan modifications or may just offer short term loan modifications,” says Pierce.

As part of their mortgage assistance plans related to COVID-19, Fannie Mae and Freddie Mac are both allowing borrowers to modify their loans after forbearance.32

Solution #5: Get a Home Equity Loan

Getting a home equity loan may provide immediate assistance to struggling homeowners, but this strategy only works if you have a lot of equity in your house, which means that your home is valued at much more than you owe on it. Anthony Pili, director of strategic planning at Greater Hudson Bank in Bardonia, New York, advises struggling homeowners to consider paying off a mortgage with a home equity line. “Banks usually cover all closing costs on home equity lines. The savings in closing costs can be used to pay off the principal balance quicker,” says Pili.

He adds that this strategy is highly effective for borrowers who have the self-discipline to pay more than what is owed each month, since the minimum payment is usually just the interest that has accrued during the month.

Solution #6: Get the Lender to Eliminate Private Mortgage Insurance

Depending on how much equity is in your home, eliminating the private mortgage insurance (PMI) can lower your mortgage payments. “If you have at least 20% equity in the property, I recommend contacting the lender about dropping the mortgage insurance,” says Pierce. She explains that borrowers who usually don’t pay 20% down are required to have PMI for at least two years, but says there may be exceptions to the two-year rule. For example, if the homeowner made improvements to the house that increased the value, the requirement may be waived.

Solution #7: Challenge Property Taxes

If the value of your home has dropped, challenging your property tax may provide some financial relief, says Cara Pierce, a certified housing counselor at Clearpoint Credit Counseling Solutions, a national nonprofit organization. “You’ll need to contact the county tax assessor’s office in the county in which the house is located to see what type of information they will need as proof that the housing values have dropped,” says Pierce.

However, Pierce says this is a short-term strategy. She warns that as property values increase, property taxes will rise. Also, be advised that it may cost several hundred dollars to have your home appraised.

The Bottom Line

If you’re struggling with your mortgage, don’t throw in the towel. There are various solutions that can help you stay in your home and manage your monthly mortgage payments.

Being a Homeowner: Big Financial Benefits

Home is where the heart is. It’s also where a big chunk of your financial responsibility lies. Home ownership is a pillar of the American dream, and while many of those in younger generations either can’t afford to or actively choose not to pursue it, those who buy in to the housing market often see major financial benefits.

There is no doubt that becoming a homeowner is one of the biggest financial decisions you will make in your entire life. It’s also undeniable that simply getting to that point requires a certain degree of financial success. You need to come up with a down payment and closing costs (generally about 3 percent to 4 percent of the total home purchase price for buyers) before you can even turn the key in the door. But among those who take on the big task of home ownership, many see financial benefits that far outweigh their initial investment, especially during tax season. Here are 5 of them.

Amass equity

Every single month that you pay your mortgage you own just a bit more of your home. This is a big benefit over renting, where you’re paying comparable monthly fees without any comparable stakes. The equity in your home builds in two ways and often concurrently: (1) equity builds as the value of your home increases, and (2) equity builds as you pay off more of your loan. These two factors mean that after the first couple of years (when, again, you’re mostly just paying mortgage interest), every month you pay money toward your loan you are building up your financial resources for the future. It’s why some people refer to mortgage payments as “forced savings.”

Want to build equity even faster? Take steps to pay off your debt quicker (like financing with a shorter term loan or paying more than you owe every month) or increase your property value (think home improvements and a focus on routine maintenance).

Build up a stronger financial future

The recent recession threw a wrench into the idea that home ownership always builds wealth over time. But the fact remains that owning a home is one of the fundamental means of accumulating wealth as we age. The caveat: you have to buy a house that you can actually afford.
Asset-wealth is a much more secure predictor of future financial stability than income, which can—and often does, in today’s evolving economy—change from year to year. In a strong economy, home values generally increase by 3 percent to 4 percent every year, thanks to inflation and natural population growth. From 2011 to 2016, as the housing market has recovered from the bubble that contributed to the recession, home values have been increasing even higher at an average rate of 6.3 percent a year. Putting money into home ownership versus a rental is akin to the difference between putting money into an investment account versus a no-interest checking account, with the latter being only as valuable as it is in the moment while the former increases over time.

More control over day-to-day housing-related costs

Unless you change the terms of your mortgage, you know the base cost that you’re going to be spending to live in your home every month, both now and in the future. This affords more stability than rent, which is variable and can (and often does) change over time. And control over costs goes even further than that. As a renter, you don’t have a say over whether your landlord supplies you with energy-efficient appliances that can save you hundreds of dollars every year, but you do have to pay the utility bill either way. As a homeowner, you can make better short and long-term financial decisions that are geared specifically toward your own financial goals and abilities. While this isn’t likely going to help you save for your future in the same way building equity does, it should bring you peace of mind to know that you’re saving money everywhere that you can.

Home ownership tax deductions

You get a number of tax breaks for owning a home, most notably a deduction for the interest and property tax portion of your mortgage. This deduction is particularly useful for off-setting the initial financial blow that comes with purchasing your property, since in the first years of owning your home you’re mostly just paying off the interest on your mortgage, as opposed to the principal. The first year you buy your home you are also able to write off any mortgage points on your loan, which can lead to pretty considerable savings depending on how many points you claimed. And if you ever decide to refinance your home after building sufficient equity in it, you also have the option of taking out a home equity line of credit, which is itself tax deductible.

Do keep in mind: the Tax Cuts and Jobs Act, passed in 2017, limits mortgage interest deductions to $750,000 of your total mortgage debt, including any home equity credit you take out. Previously, the limit was $1,000,000 in mortgage interest deductions plus a $100,000 for home equity credit.

Positive perks

Home ownership has other financial benefits that may come in handy for you someday. For example, a mortgage is considered “good debt,” and as such, it is likely to increase your credit score, provided you always make your payments on time. It also proves your credit-worthiness for other things you may want to consider, like a business loan or a new line of credit. It can even lower your monthly car insurance payments. While perks like these should certainly not be deciding factors when determining whether or not you should purchase a home, they do add up as additional benefits if you choose to opt in to the housing market.

But what about the financial risks?…

Owning a home isn’t all equity building and cost cutting. Aside from the significant payments that have to be made in order to own a home in the first place, there are also some financial risks that all potential and current homeowners need to keep in mind when trying to balance their budgets.

The biggest financial risks for homeowners are in terms of maintenance costs. There’s no landlord to put the responsibility on if the roof starts leaking or the heating system goes out in the middle of winter. While you’re unlikely to face major repairs like this all of the time, they do occasionally come up and it’s important for all homeowners to have savings set aside to deal with them when they happen.

Then there’s the risk of home depreciation. Ultimately, it’s your home’s land that appreciates in value over time, barring any major negative changes in your area like a natural disaster or a school or major business closing. The structure of your home, however, tends to depreciate in value as things get worn out and lived in. While you don’t have a lot of control over what goes on in your neighborhood that may negatively impact the price of your land, you do, fortunately, have some control over maintaining and increasing value on your home’s structure by keeping up with maintenance and putting in certain home improvements. Don’t let your home’s value be something that you just tacitly accept—work toward making sure your home, and not just the land it sits on, is appreciating as the years go on.

Being a Homeowner: Benefits

With a whopping 64% of Americans owning homes, the United States has the highest percentage rate of home owners than any other nation. Our nation was built upon people working with passion and vigor to pursue anything they wanted. Over the past century, becoming a homeowner has been considered a part of this American Dream. Broker President of Phipps Realty said,”There’s a reason why home ownership is called the American Dream – it’s part of our collective history and an essential part of building our nation’s future, as well.”

History of Home Owning

In 1917, the U.S Department of Labor established the first federal program designed to encourage home ownership.

In 1933, after the Great Depression hit, FDR created work programs and mortgage relief reforms to help ensure people they would be able to keep their homes.

We’ve come along way since then, making many reforms and changes to help make it easier for individuals to purchase a home for their family. If you look through the history of home ownership, you can get a better understanding of how much the Federal Government truly encourages and supports the American people to purchase their own homes.

Today new home buyers chase after this dream not just for the stability and security, but now studies are finding, for the financial investments. Researchers and Real Estate agents find all sorts of reasons people benefit from purchasing their own home. Here are our top 5 benefits.

1. Gain Equity

Home equity is considered the current market value of your home minus any outstanding home loan balances. The rate of a return on a home investment increases the longer you live there. This is why becoming a homeowner is one of the best investments that you can make.

Real Story, a New Jersey real estate commentator states, that homeowners can use home equity that has been built up to get cash for emergencies or to purchase items for home improvements thereby possibly increasing a home’s net worth even more than before.

Buying a home allows you to drastically increase your long term wealth as opposed to those who rent. One of the greatest benefits of owning a home is that this allows you to live a “rent free” retirement once you’ve paid off your mortgage. Or as you get older, you could also sell the home and use the money to purchase something smaller.

2. Home Improvements

There’s not much wiggle room allowed for upgrading or changing up your home if you’re renting. One of the benefits of owning a home is there’s no permission needed. Add a pool, re-paint the entire house- its your home and you can do as you please! Modifying your living space to whats aesthetically pleasing to YOU is the most satisfying feeling and worth all the work put in. It’s also considered a worthwhile investment and most upgrades add value to your home.

3. Tax Advantages

Everyone benefits from home ownership-especially our economy and federal government. This is why the government offers many tax incentives for new home buyers. Home related purchases and private mortgage insurance can also qualify you for tax benefits.

According to the MIT Federal Credit Union, interest on first and second mortgages, home equity loans of up to $100,000, and refinanced loans are all deductible and local property taxes are deductible in the year that they are paid.

4. Promotes Good Community & Neighborhoods

Buying a home in a place you plan to stay in for a long time also benefits you and your neighborhood! It feels good making connections and new friendships with neighbors, becoming a part of local organizations, and participating in traditional events. This community involvement is a major benefit to becoming a homeowner and something your children will grow up to thank you for one day.

5. Sustainability

When people think of home, they think of safety, security, and being comfortable. As a renter, it’s unsettling not knowing what changes you can or cannot make in your home, if the landlord is going to randomly raise rent, or run an inspection on the house. These are just some of the many pitfalls of being a renter. As a homeowner, none of those are an issue. It puts new homeowners at ease knowing they can settle into a home they can raise their families in and make memories. They know their consistent monthly mortgage payment and overall have so much more freedom than renters do. This peace of mind is priceless and one of the main reasons individuals finally decide to become homeowners.

Becoming a homeowner is the most rewarding experience where families will build lives and memories, along with positive financial futures. So if you have been on the fence about whether to continue renting or to purchase your own home, if you choose a great team to work with you will see just how simple the home buying process really is! Sun American Mortgage has over 33 years experience and always leaves every customer feeling valued and incredibly happy about their new home.

Home Improvement Grants for Your Next Project

A home improvement grant also called a “home repair grant,” is a type of financial aid issued by the government at the federal, state or municipality level. It’s designed to help homeowners in that region make select improvements to their properties.

As long as the applicant and the project meet certain requirements, a home improvement grant does not need to be repaid.

One of the primary problems when doing a home improvement project is the cost to do the project correctly. Luckily, there may be a grant that will help you offset the expense. Dozens of government-sponsored home improvement grants offer money to homeowners making selected updates to their properties. Of course, not everyone—nor every project—will qualify for grant funds.

Grants are highly competitive, and many are designed for specific improvements that ensure the home is safe, accessible, livable and non-hazardous to those on the property and in the community. Read on to see if a home improvement grant can help you achieve your goals.

Requirements & Eligibility

Eligibility requirements vary by the grant. For the most part, grants will have requirements pertaining to the homeowner’s income, their location and the projects the money can be used on.

Just like with your mortgage application, you will need to produce documentation to prove your income. You may also need to prove your financial need, as well as offer assessments of your home’s conditions, your estimated project costs and more. Make sure you know the full scope of requirements for each grant you apply for. Remember, most grants are very limited in number and only a few homeowners are chosen.

Where to Find Home Improvement Grants

There are several places you can find available home improvement grants. Your best bet is to start with your local HUD office (Housing and Urban Development). HUD offers grants like the HOME Investment Partnerships Program for low-income homeowners, as well as various types of home repair loans. Visit HUD.gov to find the office in your area.

You can also look to the National Residential Improvement Association for grants. Just fill out the NRIA’s brief application form, and tell them about your property, the home’s history and the projects or improvements you’d like to take on. An NRIA specialist will get back to you with potential grants you may be eligible for. They might also include options for tax credits, home improvement loans, discount programs and local incentives that can help you cover—or at least reduce—the cost of your projects.

Finally, if you’re in a designated rural area, you can also apply for a home improvement grant with the U.S. Department of Agriculture. These grants offer up to $7,500 toward addressing health and safety hazards at the home or improving its accessibility.

Home Improvement Grants vs. Other Options

Grants aren’t the only way you can fund your much-needed home improvement projects. You can also use a loan, refinance your property or leverage the equity in your home.

The Federal Housing Administration’s 203K loan is a popular choice for homeowners looking to improve their properties. The 203K improvement loan lets you borrow cash to use toward your home repairs and projects, typically at a low rate. There are also low-cost loans from the USDA and HUD if you meet certain location and income requirements.

If you’ve lived in your home a few years and have built up some equity, you can also look to home equity lines of credit (HELOCs), home equity loans or a cash-out refinance. Make sure you shop around first for the best rates. You do not have to use your current lender when refinancing or taking out a home equity loan.

In the event you’re making green or eco-friendly improvements to your home, you may also qualify for certain green energy grants or tax credits that can help offset your costs. For information on this, check out EnergyStar.gov, contact your city or state energy commission and call up local energy companies. Many will offer grants or even reduce your monthly costs when you add certain energy-saving upgrades. The PACE loan is also a good option for green improvements if you’re looking to borrow funds.

Is Owning a Home the Right Choice?

Buying a home is the biggest financial decision many people make. Among the questions you need to ask yourself is why are you looking to buy?

“There is an emotional side to home ownership, particularly in the United States – it’s often baked into people’s vision of the future or part of the American dream,” said Tom Figgatt, president of Portolan Financial in New Orleans. “And it does feel good to own your own house; you can feel like it is a home and not just a temporary dwelling.”

But it’s not as simple as that. The benefits of home ownership don’t come without costs and limitations. Is renting a better option? The pros and cons of buying a house should be weighed up front.

Advantages and Disadvantages of Owning a Home

Before buying a home, it’s important to consider how such a purchase will affect your finances and your lifestyle. It makes sense to review all of the advantages and disadvantages of becoming a homeowner before making this big commitment.

What Are The Disadvantages of Owning a Home?

Equity doesn’t grow immediately: Most of the payments go toward interest in the early years of a mortgage, so you don’t gain equity quickly unless property values in your area skyrocket.
Illiquidity: Although houses have value, they typically don’t sell as quickly as stocks or other assets. While you’re trying to sell your home, you still have to keep making mortgage payments and maintain it.
High upfront costs: Closing costs on a mortgage can run from 2% to 5% of the purchase price, including numerous fees, property taxes, mortgage insurance, home inspection, first-year homeowner’s insurance premium, title search, title insurance, and points, which are prepaid interest on the mortgage. It can take about five years to recover those costs.
Less mobility: If one of the advantages of home ownership is stability, that means it will be more difficult to accept an attractive job offer requiring you to pick up and move to another city.
Maintenance costs: There is no property supervisor to take care of plumbing problems, and if the air conditioner goes out, you’re not only going to sweat until it’s fixed but you’ll be writing a check to get the cool air flowing again. The same is true of the landscape.
Property values can fall: That happened during the 2008 nationwide housing crisis, and more local conditions can cause this, too. Your building will depreciate over time, especially if you don’t maintain it.

What Are The Advantages Of Owning A Home?

Stable monthly payments: A fixed-rate mortgage means you’ll pay the same monthly amount for principal and interest until the mortgage is paid off. Rents can increase at every annual lease renewal. Fluctuating property taxes or homeowner’s insurance can change monthly payments, but that typically doesn’t happen as often as rent increases.
A good long-term investment: The Federal Reserve Bank of St. Louis reports that the average price of homes sold in the United States rose 28% in 10 years starting in 2009 and 10% from 2014 to 2019. Even if the value of the structure itself depreciates, the land on which it sits can become more valuable. You are investing in an asset for yourself rather than a property management company.
Building equity: Your equity is the difference between what you can sell it for and what you owe. Your equity grows as you pay down your mortgage. Over time, more of what you pay each month goes to the balance on the loan rather than the interest, building more equity.
Greater privacy: Also, since you own the property, you can renovate it to your liking, a benefit of home ownership that renters don’t enjoy.
Stability: People tend to stay longer in a home they buy, if only because buying, selling and moving frequently is difficult. Buying a home requires confidence you plan to stay there for several years.
Federal tax benefits: Mortgage interest is deductible, as is interest on home equity loans, property taxes and some closing costs when buying the home. However, Figgatt notes, tax law changes raising the standard deduction and capping deductions that can be taken on state and local taxes, make it less likely for younger people and those buying starter homes to enjoy those breaks.

Advantages and Disadvantages of Renting a Home

So, home ownership might not be for everybody, at least not in every stage of life. If renting a residence isn’t considered the American dream, not everyone in a nation of 330 million has the same needs or resources. So, before you buy, consider whether that is right for you right now.

Financial Disadvantages of Renting

No cosmetic improvements: If your home looks dated, you may just have to get used to it.
You can’t change the property: Would you like a deck for entertaining? Would you prefer a fenced yard? There’s nothing you can do about any of that in a rental except complain and see where that gets you.
Rent may increase: You may be comfortable with what you’re paying each month, but that could change when your lease comes up for renewal, typically in six months or a year.
You aren’t building value: When you leave your rental, all you take with you is yourself and the moveable property that belongs to you. It’s the property owner’s equity that grows, not yours.
No credit score improvement: While paying a mortgage on time improves your creditworthiness, you don’t get the same benefit from rent.

Advantages of Renting a Home

Low upfront costs: Except for a security deposit – often the cost of a month’s rent – you don’t have to write a big check or finance the costs required to get a mortgage. No HOA dues: Some homes are in developments with homeowner’s associations that require monthly dues on top of all the other expenses, and they aren’t optional. Not so with renting.
Rent payments may be lower: This certainly can be true if you’re renting an apartment, and it also may be the case when renting an identical house. If a mortgage is more than you can afford right now, renting makes more sense than being stretched too thin financially.
Repairs aren’t your responsibility: The property owner has to pay for that leaky faucet and anything else that breaks or wears out. So, you don’t have to factor those unplanned expenses into your budget.
Flexibility: If you want to relocate, having a mortgage can make that difficult. A house can take much longer to sell than you’d like, and if you move before it sells, you still have to make the monthly mortgage payments, so you’re paying for two residences while living in only one. Your obligation to a place you rent can’t exceed the length of the lease, and if the property owner can quickly find a new tenant, that can get you off the hook.

In assessing the pros and cons, Figgatt suggests you ask three questions.

1. Why are you looking to buy?

“If you’re looking at the purchase as an investment, it could work out very well, but high fixed costs mean the shorter the amount of time you hold the property for, the less likely you are to come out ahead relative to other investment opportunities out there,” he said. “Constantly buying and selling houses if you move frequently may be eating up wealth, not increasing it. And if you plan to rent the place out after you move, make sure you have a plan for managing the property – be ready to pay for that, too.”

2. Can you afford it?

“The down payment, closing costs and risk of sudden, very large expenses popping up combine to make it a very expensive proposition,” he said. “You need to save above and beyond your mortgage payment for infrequent yet major household expenses so that you keep it up properly. And making a smaller down payment and paying private mortgage insurance (which protects a lender in case you default on your mortgage) only increases the total cost of ownership.”

3. How long do you expect to stay in the house?

“It can be difficult to break even on a house if you stay in it for three years or less; the closing costs and commissions are significant, and expecting the house to appreciate in value enough within three years to make up for those costs may be setting your expectations too high,” Figgatt said. “And remember that your entire mortgage payment does not go towards the home’s equity. During the first year of your mortgage, depending on the terms, perhaps only about 30% of the principal and interest payments will actually go towards the principal of the home.”

How to Increase Your Home Value

Making your house more efficient, adding square footage, upgrading the kitchen or bath and installing smart-home technology can help increase its value.

Nearly two-thirds (65%) of U.S. homeowners believe the value of their home will continue to rise over the next 10 years, according to a NerdWallet survey conducted online by The Harris Poll among over 1,400 homeowners in August 2018.

That may be optimistic, considering that some factors that determine what a house is worth, like its location and the popularity of that market, are out of your control.

If, like 70% of American homeowners, you believe your house is your biggest asset, taking care of it is probably a top priority. The good news is, keeping up with repairs and making smart improvements are both proven ways to increase home value over time.

Whether you want to build equity or get top dollar when you sell, use the tips below to raise the value of your home.

1. Make it low-maintenance

Since many home buyers worry about buying a home that will need constant maintenance, replacing a major component before putting it up for sale — like the furnace, water heater or even the roof — may calm fears of an emergency repair in the near future and help get you a higher price.

Improvements that make things easy to clean and maintain may also increase home value. Consider replacing easily stained carpet with hardwood floors or replace high-maintenance wood siding with vinyl siding.

2. Make it more efficient

Energy conservation features can have a significant impact on home value, depending on what area of the country you’re in, Joanne Theunissen, chair of the National Association of Home Builders Remodelers, said in an email. Energy-efficient mortgages (EEMs) allow borrowers to take on additional debt to cover both the purchase of the home as well as energy-efficient upgrades. EEMs can also offer lower mortgage rates to increase purchasing power, according to Energy.gov.

Consider double-paned windows, enhanced attic insulation, LED lighting and efficient appliances as a way to increase home value and entice energy-conscious buyers.

If you’re willing to go bigger, put solar panels on the roof. Thirty-nine percent of agents surveyed recently by the National Association of Realtors said solar panels increased perceived property value. But since solar panels are a big financial and structural commitment, they only make sense if you’re hoping to increase value over the long term, not looking for a quick boost in resale value.

Schedule an assessment with a certified energy auditor or your utility company to determine where your home is wasting energy and which upgrades will save you the most money.

3. Make it more attractive

Curb appeal — how your home looks from the street — is your first chance to make a good impression, says James Murrett, president of the Appraisal Institute, a professional association for real estate appraisers. A home’s exterior needs to make a prospective buyer want to walk through the front door.

Make sure existing landscaping is well-maintained. If your yard seems dull in comparison with your neighbors, consider planting flowers or repainting the front door.

Once the exterior looks good, focus on the kitchen and bathroom. When these two rooms are outdated, they can keep a property from reaching its highest valuation, Lori Noble, a senior residential appraiser (SRA) in Charleston, West Virginia, said in an email.

And you don’t have to spring for heated towel racks or marble floors, either. A minor kitchen remodel recoups 81% of its cost in added value on average, versus 53% for an upscale kitchen remodel with stone countertops, custom cabinets and commercial-grade appliances, according to Remodeling magazine’s “2018 Cost vs. Value Report.”The same is true for bathrooms; a midrange remodel — new flooring and a few updated fixtures — delivers a 70% return on investment, while an upscale bathroom remodel — heated flooring, custom cabinets and designer fixtures — sees 56% on average.

4. Make it smarter

Safety-enhancing gadgets top the list of “smart” technologies buyers want in their new homes, according to a 2018 survey by Coldwell Banker. These safe and smart devices include thermostats, fire detectors, carbon monoxide detectors, security cameras, door locks and lighting.

While smart tech doesn’t always increase home value, it does add appeal, Tavia Galvin, a licensed Realtor in Arvada, Colorado, said in an email.

Those who see themselves as “techies” are more likely to pay more for these items, Martin said.

Unlike replacing the roof or renovating the bathroom, you can usually install these devices yourself for about $1,000 or less.

5. Make it bigger

“Square footage has a huge impact on value,” Angie Martin, director of operations at Hales and Associates in Overland Park, Kansas, said in an email. Price per square foot is one way she helps clients compare homes that are similar in style and upgrades.

Bigger homes often command higher values, and even if an appraiser doesn’t officially acknowledge the full value of added space, a buyer will likely notice.

Adding a room is the obvious way to make your house bigger, but you can also create additional living space by finishing the basement or building a deck.

How to pay for improvements that increase value

When thinking about how to increase home value, root your expectations in reality. Updates rarely recoup 100% of their cost, but they can make your family more comfortable and even help your home sell faster.

If you can’t pay for home improvements in cash, be sure to choose the right method of financing for you.

Cash-out refinance: This popular refinance option may be a good fit if you want to tap equity but don’t fancy a second mortgage. Of the 36% of homeowners who reported taking a cash-out refinance in the NerdWallet survey, over half (52%) used the funds for home improvements and repairs. A cash-out refinance doesn’t make sense if your equity is limited or current cash-out mortgage rates are higher than your existing rate.

Credit card: Putting home renovations on a credit card may be OK as long as you’ll be able to pay off the entire balance in a short amount of time.

Home equity loan or line of credit: These second mortgages turn your home’s equity into easily accessible funds. Home equity loans pay out in a lump sum while home equity lines of credit, or HELOCs, are a line of financing you can borrow against over time. Both home equity loans and HELOCs have interest rates, fees, monthly payments and tax advantages to consider.

Personal loan: If you don’t have enough equity for a home equity loan or HELOC, consider a personal loan. The interest rate will be higher than home-equity-based financing, but lower than a credit card in most cases.

How to Save Money on Remodeling Costs

We originally paid $200,000 for our 4,000-square-foot home and intend to own it for a good, long time. We’ve worked more or less nonstop since moving in three winters ago, and kept a close eye on rising housing prices in our (way undervalued) neighborhood, a historic district that’s home to the largest concentration of Victorian houses in the country. So, when our house appraised for over $340,000 after those three years, we took out a renovation loan thinking we could do an amazing kitchen, or convert a laundry room into a master bath. I decided we wouldn’t have to choose: I would make both renovations work for what money we had available. In this case, $50,000.

In the end, we spent exactly $50,000 redoing both the kitchen and the existing bathroom (even throwing in some upgrades to the dining room while we were at it). Yep, I stayed on budget and on schedule.

Was it worth it? Our realtor’s new estimate of what he would list it for now blew past my wildest expectations: $429,000 to $448,000! Based on his assessment, we added about $100,000 in value to our home.

So how did we spend $50,000 on what I’m calling a $100,000 remodel? There’s no one magic bullet; it meant saving on absolutely every aspect we could, large and small. Settle in for the full run-down:

1. Know when to go custom… and when to not go custom

I first priced out custom shutters for our very old kitchen windows and the quote took my breath away. So I went to The Shutter Store for made-to-fit wooden plantation shutters at (yep) half the price. I measured like sixteen times to be sure, and it was fine.

But I also knew I didn’t want a run-of-the-mill cabinet shop island. Dreams of repurposing a vintage French store counter had to give way to our limitations, so instead, I contacted a woodworker friend and told him what I had to spend and what I wanted. He was able to work within that budget to design and build a beautiful custom piece using reclaimed wood from the same time period as our house. The island is now the anchor of the kitchen.

2. DIY contracting

To start, I ran the projects myself. General contractors have great value (my dad is one so I know this firsthand). If we’d had the money and been able to line one up, I’d have done it in a heartbeat. It became a heavy part-time (veering into full-time) job and there are a lot of drawbacks to being your own GC. But, that’s 10 percent right off the top of your budget. What’s more, while a contractor will go a customary route, I had the freedom to bargain hunt to my heart’s content, like buying kitchen cabinets for dirt cheap on Facebook Marketplace, for instance. Which brings us to…

3. Floor model appliances FTW

Ok, so a Ferrari red Bertazzoni range was NOT part of the plan. But when we randomly walked into a floor model clearance at a fancy fixture store and saw the shiny red Italian range for half price? It suddenly happened. The $6,000 stove, something I’d never have dreamed of having, was $3,000. We also scoured the internet looking for a deal on the fridge we lusted after at Lowe’s, a gorgeous black stainless KitchenAid French door model that was an eye-popping four grand. Excessive Googling finally led me to a floor model at a Sears Outlet. Even after paying for shipping, we saved almost half (and ended up getting a refund on shipping costs).

4. Strategic timing

We couldn’t find the matching KitchenAid dishwasher on any kind of crazy deal, so we waited for Lowe’s to offer an extra 10 percent off to Lowe’s cardholders to buy that—while it was on sale, no less.

5. Create big impact with lower cost materials

We did an interesting twist on subway tile for the shower—the tile is longer than the standard 2″ x 6″ dimensions, and has a wavy texture. And then we took it all the way to the ceiling and wall to wall, set on thirds. It created instant drama with a (relatively) low cost tile. The shower floor was a much smaller space so we could splurge on a special order tile. Meanwhile in the kitchen, we balanced the pricey quartz countertop on the island with a butcher block top on the cabinets at a fraction of the price.

6. Love the one you’re with

We wanted to start completely over in both rooms, but to move plumbing in the kitchen alone was going to cost $2,500. So we opted to keep the same footprint. I spent a couple hundred dollars working with a design consultant, who helped me make smart choices on how to tweak what I could without expensive plumbing moves. That was money wisely spent.

7. Change gears mid-stream

We’d planned to install a high-end(ish) floor tile in the kitchen, then found original hardwood below the ugly old stuff on demo day. We’d budgeted about $3,000 for the tile and installation, so the $1,100 we spent refinishing the existing floor was a coup. That price included a sweet discount for being a repeat customer—we’d hired the same company who restored the beautiful floors in our third floor.

8. Stalk Amazon Warehouse and monitor prices

Buying the kitchen and bathroom fixtures refurbished or repackaged from Amazon Warehouse and third party sellers was a huge savings. We paid builder-grade prices for high-end finishes, saving as much as 500 bucks on one faucet alone. I also used the price tracker camelcamelcamel to watch for prices to drop on whatever we needed.

9. Big money for boxes? No way

I have a thing about spending a ton of money on cabinets. Cabinets are normally a massive expenditure in a kitchen reno. So we did a couple of things here: no upper cabinets, instead opting for open shelving. Besides the island, we also only had room for two lower cabinets, which also saved money. And those were a fortuitous, albeit somewhat, shady find: A longtime employee of a local cabinet shop was selling their practice runs and samples. They’re slightly imperfect and they cost 50 bucks apiece.

10. Price match

I bought a lot of stuff online, but wanted to see some things—lighting, for instance—in person, so we went to a local lighting store. I found a great fixture I’d never have chosen online, but cost more than any of the cheap lighting stores on the web had it. No problem—the sales assistant just had me show him the lowest price I could find for the same thing and he matched it, to the tune of a couple hundred dollar savings.

11. Use the big box stores wisely

I avoided the big box stores for the most part, because I wanted a more unique look. But when I couldn’t find an affordable bathroom vanity/medicine cabinet/linen cabinet set anywhere, I turned in desperation to Menards, where I found some very similar versions of items I’d eyed at the high-end shops online, but for a fraction of the cost. I also tracked down a farmhouse sink online at Home Depot for about half what I’d seen from the high-end places.

12. Shop around

Yes, this isn’t a secret. But let’s take the quartz countertop I had my heart set on. I called practically every cabinet and counter place in town to get prices, and the cost varied tremendously. I went with the cheapest, and while I can’t give them any compliments on their service, they did the job and the Silestone Eternal Calacatta Gold I chose is just delicious.

13. Don’t forget to thrift!

My first purchase for the new kitchen was vintage brass knobs for the cabinets. I found them at my old stomping grounds, Architectural Salvage Warehouse in Detroit for 50 cents apiece.

14. Shop the house and make it fun

When it came time to accessorize the kitchen, there wasn’t really anything left. But I realized that an old, heavy mirror I’d found in the house and stashed in the garage would be perfect. And we took advantage of a painting workshop to collaborate on a small mural to hang on a wall. A free mirror and $40 workshop to make a statement on two walls? Done.

15. Take advantage of contractor discounts

I asked for a discount everywhere and from everyone. Many vendors offer ‘to the trade’ pricing so, since I have a side gig helping Airbnb hosts with their listings, I explained that I’m a short-term rental hospitality and design consultant, and several shops gave me 10 percent off my orders. Your mileage may vary, but it seems like a lot of places are willing to work with shoppers.

I scored even bigger discounts using my sub-contractors’ connections. The bathroom and the kitchen backsplash tile both dropped drastically in price at the specialty tile shop after they plugged in our tile installer’s info. And, after giving my plumber’s name at the plumbing supply house, they dropped about a hundred bucks from the toilet’s price.

At the end of the day, getting this kind of savings boiled down to a lot to time, a lot of work and research, and being willing to take a non-traditional approach. And it couldn’t have happened without advice from people smarter than me, and sub-contractors we knew and trusted and who were patient with my frequent lack of knowledge.

Financial Tips After Buying Your First Home

How do you protect your investment in your first home? Despite the relief of finally being there after all the work of finding and buying the property, the financial planning and budgeting don’t stop once you collect the keys to your new home.

All the work you’ve already done should help the process. You had to determine how much home you can afford, pull together funds for a down payment and apply for a home loan. According to a survey by FREEandCLEAR, 75% of home buyers likened the mortgage-acquisition process to visiting the dentist or undergoing a physical exam.

Read our list of what you need to do next to keep the momentum going in securing this key stage in your financial life and building a firm foundation for your future.

Review Your Retirement Plan

Whipple says that, if your budget’s changing and increasing after buying a home, it’s important not to neglect your other financial goals. That includes saving for retirement. According to a report by GOBankingRates, 64% of Americans are on track to retire broke, and you don’t want to be one of them.

Check your contribution rate to your employer’s plan if you have a 401(k) or similar retirement account at work. Compare that with your newly updated budget to make sure that the amount is sustainable and determine if there’s room to increase it. If you don’t have access to a 401(k), consider substituting a traditional or Roth IRA.

Saving an emergency fund for non-housing related expenses and putting money into college accounts for your kids may also be on your list of goals. Hill says that new homeowners should be aiming to save at least six to 12 months’ worth of expenses in a liquid savings account for rainy days.

Whipple says that, if you’re struggling to make any progress toward saving after buying a home, you should take a closer look at your spending. “Making a budget is a great idea but sometimes that starts with tracking where your money is going so you know how much you actually need to budget.”

Revisit Your Budget

Agent Elizabeth H. O’Neill of Warburg Realty in New York City says it can be daunting to think about establishing a homeowner-oriented financial plan after you’ve just gone through the buying process, but it’s an essential step you can’t afford to skip.

“Sitting down and working out a budget will pay dividends,” O’Neill says, and your budget should thoroughly cover all the costs of owning a home. That includes your mortgage payment, as well as any increases in expenses associated with higher utility costs, homeowner’s association or condo fees, and maintenance or repairs.

The latter two are a significant consideration if you’ve recently made the transition from renting to owning. Having to fix a leaky toilet or replace a broken window out of pocket can come as a wake-up call if you’ve never owned before, O’Neill says.

According to a Bankrate survey, the average homeowner spends $2,000 per year on maintenance, including landscaping, housekeeping, and minor repairs. That amount, however, doesn’t cover larger expenses you may encounter as a homeowner, such as having to replace your HVAC system or roof, both of which can easily surpass $5,000.

Tad Hill, founder and president of Freedom Financial Group in Birmingham, Alabama, says that first-time buyers should set up a separate homeownership savings fund to cover bigger repairs. “The price range for these services is not small, so I’d suggest planning to keep at least $5,000 to $10,000 in cash so you have it available when something breaks.”

You’ll also need to leave room in your budget to set aside money for upgrades if you plan to overhaul your kitchen or update the bathrooms. Homeowners spent a median total of $15,000 on renovations in 2018, according to the latest U.S. Houzz & Home Annual Renovation Trends survey. Of the 142,259 respondents, 37% were likely to use credit cards to fund a renovation, but paying cash (as 83% did) can help you avoid high interest and finance charges.

In addition to avoiding new debt, you should also prioritize paying off any existing debt you have. Eliminating car loan, credit card or student loan payments can free up more cash that you can funnel into your home savings fund, and it can give you more breathing room in your budget. If you’re struggling to make progress with debt due to high interest rates, consider a 0% APR credit card balance transfer offer or refinancing student loans.

Update Your Insurance

As a first-time buyer, homeowner’s insurance is a must, but there may be other types of insurance you need as well, starting with life insurance.

“Life insurance is like a self-completing plan,” says Kyle Whipple, a financial advisor at C. Curtis Financial Group in Livonia, Mich. Insurance is used to reduce risk, and if you pass away, “it’s nice to know that proceeds, which are tax-free, can help pay off a mortgage.” That’s critical if you’re married and don’t want to leave your spouse burdened with debt. Life insurance can also be helpful in providing cash flow to cover monthly expenses or pay college costs for your children if you have a family.

O’Neill says that, when buying or updating a life insurance policy, you should ensure that you have at least enough coverage to pay off your mortgage and cover living expenses for your family for the first few years after you pass away. One question you may have is whether to choose a term or permanent life insurance policy.

Hill says that term life is the least expensive option since you’re only covered for a specific term. This type of policy can make sense if you’re a first-time buyer and you only need coverage while you still have a mortgage. Permanent life insurance, such as whole or universal life, lasts a lifetime and can offer cash value accumulation, but it can be much more costly. If you’re unsure of which to buy, Whipple suggests that you discuss your options with a licensed insurance broker or agent.

Disability insurance is something else to consider. According to the Centers for Disease Control (CDC) (CDC), 22% of adults in the U.S. have some type of physical or mental disability. If an injury keeps you out of work in the short-term or a serious illness requires an extended leave of absence, that could affect your ability to keep up with your mortgage payments. Short- and long-term disability insurance can help protect you financially in those types of scenarios.

Whipple says that you may also want to investigate insurance policies or home warranties to help with repair costs, especially if you have an older home. O’Neill recommends looking into whether you can get a discount by bundling homeowner’s insurance and other insurance policies together.

The Bottom Line

Buying a home creates new financial responsibilities, but with the right planning, you can keep from becoming overwhelmed. Ideally, preparing yourself financially begins before you ever buy a home, but even if you’re getting a late start, it’s important to make planning a priority.