If you’re like many Americans, you are probably looking ways to shave money from your housing bill. There usually aren’t any quick fixes with this sort of thing, most of them require some degree of sacrifice. That said, here are some moves you might consider.
1) Work Your Lease. If you are close to the end of your lease, consider doing two things. First consider moving out and not renewing it. Second, if you like your place consider negotiating with your landlord. Its a real pain for landlords to get tenants, so you might have some bargaining leverage. If the lease is still in effect, consider getting out of it. Depending on who you rent from, you might be able to talk your way out of the lease – try pleading poverty or doing some informed bluffing. Alternatively you might carefully read your lease to see if you have to pay a penalty to quit early.
2) Consider moving in with a friend or with your parents. If you are able to use put the money you’re saving to good use, this could potentially get your finances in order again quickly. While living with your parents not might be the best for your self-esteem, lots of debt is worse.
3) If you want to stay in your current place, consider getting a roommate. This is a bit harder with smaller apartments, but if you’ve got a one bedroom there are ways to organize it. You might have to get creative with you how you partition up the apartment, but cramming lots of people in one place has been done before.
1) Sell and downsize. Smaller homes are considerably cheaper in terms of heating, insurance, mortgages and property taxes. If you downsize you could realize considerably lower housing expenses. Millions of empty nesters can’t be wrong.
2) Rent out an extra room. More people in a home means increased utilities and food bills, so be sure that you’re making enough money to cover the cost of having guests.
3) Refinancing is always an option. Interest rates are super low right now, but when you refinance you want to be sure the lowered payments are worth the cost of making the refinance deal happen. Also, watch out for loans with ripoff terms like interest only or balloon payments.
4) Lease your home and move someplace cheaper. This tends to be a bit more complicated because you’ll probably have to learn to be a landlord if you aren’t one already. Also, you’ll have to be sure that the amount you charge in rent covers all your expenses. By your expenses I mean all of them, taxes, insurance, maintenance, repairs, legal fees, utilities, etc.
5) Dump your PMI. In some cases you might have something called private mortgage insurance (PMI). PMI is often required by lenders when you have more than 80% loan to value in your mortgage. Sometimes if you can lower the amount you owe on your mortgage to 80% loan to value or less, PMI is no longer required. This can shave a couple of hundred monthly off your mortgage.
6) Look into a loan modification. Loan modifications are increasingly hard to get, but the Federal Government has provided financial incentives to some of the major banks to make home loans more affordable. So if you quality, if your lender participates and if you want to deal with the paperwork, you might be able to get a better interest rate. You will have to hurry though because many loan modifications programs are set to expire in 2015.
Finally, even if you are comfortable with how much you pay, a lot of these suggestions are extremely cost effective. For example if you are able to pay off your PMI by making a $10,000 payment and you get a $200 per month savings you are looking at a 24% return on your money. If you take on a roommate who pays you $400 a month, then over the course of a year you’re looking at $4,800 in additional income. Neither of these figures are anything to sneeze at.
Readers, if you have any other additional ideas you’d like to share feel free to leave us a comment.