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How Being a Homeowner Can Save You Money

Now that I am hopefully getting into the world of home ownership, I’m starting to look for all the ways that owning a home can save me money. There are some big expenses that come along with home ownership (like repairs and renovations) but hopefully I can offset those expenses with some of these money saving techniques.

Save Money on Taxes

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photo credit: Images of Money

Politically I’m not a fan of social engineering via tax loopholes, but as a responsible financial adult I’m going to do whatever I can to reduce my tax burden. Owning a home is one of the best ways to do that. Laws may change, but as of today any interest I pay on my home mortgage can be deducted, as well as the property tax I’ll be paying every year. In my first year of home ownership I expect to pay over $10,000 of taxes and interest combined, meaning it will reduce my taxable income substantially.

Build Equity In the Home

My mortgage will be about $730 a month. When I make my first payment $245 of that will be applied to the principal of the loan, meaning my debt decreases (and my net worth increases). Today I write a rent check and I’ll never see 100% of that money again. At least when I’m making a mortgage payment I’ll see a decent portion of that payment go directly towards equity in my home.

Get Insurance Bundle Deals

I’m currently shopping for homeowners insurance and every quote I’m getting is a home/auto bundle deal. It sucks that homeowners insurance is expensive, but at least it might make your auto insurance cheaper. I can’t do much about lowering my mortgage or property tax, but with a little bit of shopping for car and home insurance I can save myself a little bit of money. Tip: you may be able to get the same bundle deals as a renter if you purchase renter’s insurance.

Other Suggestions?

Unfortunately I’m new to this whole home ownership thing and I don’t have a lot of great insight because I won’t even close on my house until December, and that’s only IF the financing goes smoothly. Do any experienced home owners out there have tips on other ways homeowners can save money?

18 thoughts on “How Being a Homeowner Can Save You Money”

  1. I am in my second year of home ownership and this year I will be attempting the ‘every other year’ tax principle. This year I paid my taxes in January and I will also pay this December. Next year, however, I will not pay any property taxes. Lather, rinse, repeat…

    I typically hover right around the standard deduction limit so this should allow me to reduce my taxible income every other year then claim the standard deduction on the others.

    Does anyone else go this route? Is it worth it?

    1. That sounds like what I do with charitable donations,but I didn’t know that was an option for property taxes. It sounds like a great way to save money on taxes

  2. To answer the previous commenter, this is something that tax experts definitely advise, and according to my tax adviser, they even have a name for it: bundling. Where you bundle expenses and such in ways that helps you achieve the maximum refunds and such.

  3. If you buy an energy efficient fridge, windows etc., you can get a tax rebate/credit or whatever it may be. I don’t think you would be replacing broken appliances if you rented a place.

    1. I’ve tried to research this but it looks like the only federal tax credits are for things like geothermal HVAC, solar panels and wind turbines.

      I’ll have to look and see if my state offers any credits.

  4. Aren’t you getting married soon? That means your standard deduction will be 11,900 for 2012. You will pay over 10,000 in taxes and interest. Where does the tax savings come into play?

    You only save on the portion that your itemization will be more than the standard deduction. If you do save in the first few years that itemization goes down as you pay off the mortgage.

    1. I’m not getting married until 2014, so I have at least 1 year of getting those tax benefits. I also donate money to charity, so I should have a problem saving a bit on taxes even when I am married.

      1. My advice, and I’m a CPA, is to be cautious of asset titling then before you are married. If the home and mortgage are in your name alone and you pay those expenses directly, no problem. If you go ahead and buy the home in your joint names, before marriage and each pay a portion of the mortgage/taxes, you have to separate those via who-paid-what. The tax code specifies that the expenses are deductible based on who pays the expense and who has the legal obligation of paying the expense.

    2. Mortgage Interest, Insurance Premiums, and Real Estate taxes will likely total more than 11,900 for the next 10 years. Add a little charitable giving and there are your tax savings. Check out the IT’s form schedule a to see everything you can itemize that will get you greater than the standard deduction.

  5. I could itemize a similar amount, but with how aggressively I’m paying down my mortgage, I won’t be able to.

    Another way that you save money is by your rent not going up every year. Your mortgage payment will stay the same. Your property taxes can go up, but they likely won’t go up as steeply as rent can. Also, not moving for many years can save a LOT of money!

    My car insurance actually got cheaper when I bought a condo. Apparently they think I’m less likely to get into an accident because I own a condo. Getting married should help with that too though.

    You can also build equity instead of putting your money into cash savings accounts. That’s my plan at least – I should have my place paid off in under 5 years from the original loan date!

  6. Maybe it is the difference in Texas and Indiana, but my home owners insurance is extremely affordable. I mean it is more than renter’s insurance, but I would hardly call it expensive. My property taxes are pretty reasonable too, but for some odd reason, Indiana treats renters better than homeowners and lets them deduct up to $3000 of rent a year on state taxes but only lets me deduct my property taxes (about $1200).

    As far as energy efficient credits, I’m sure some will show up in a couple years or so. I got lucky and got the $1500 when we replaced our HVAC system with a high efficiency gas furnance/heat pump combo. Made my “payback” period gor from 5 to 3 years.

  7. you will have more space, so if you find something you use on sale you can buy more of it and store it more easlily than in an apartment.

  8. Ashley @ Money Talks

    I think the best part of owning is the fact that will someday be paid off! I’m looking forward to living in my house for free

  9. I’m not sure how big your future house is, but you could always rent out a room and make money or at least save a couple hundred on your mortgage.

  10. Crystal @ Prairie Ecothrifter

    Our utilities actually went down in our first home simply since it was way more energy efficient than the apartment we were renting. We also rent out a spare bedroom for $600, which pays our first mortgage of $505. Then the $1200 rent from the first house covers our current $990 mortgage. So we end up with $950 in property taxes, homeowner’s insurance, and stuff like that and are on track to owning our first home outright next year and our current home within the next 10 years. Good luck!

  11. Daisy@Everything Finance

    It largely depends on the country and area you live in, but there are certainly ways to save some cash through home ownership, as you have indicated. I live in Canada and I don’t know that you can deduct interest here, but that’s pretty great that you can. We have tax grants for our property taxes and stuff like that too.

  12. You wrote that your net worth increases, but it actually decreases. You gave up $730 in cash (part of your net worth) to gain $245 in property equity (also part of your net worth).

    All in all, every time you make a house payment, your net worth instantaneously decreases by $485. Now, it’s a better option if you would have to pay $730 in rent every month otherwise, because then your net worth is decreasing by $245/month less than it would be, but it’s a little misleading to say your net worth goes up when you pay your mortgage.

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