With the rising cost of living, particularly due to high tariffs on goods like construction materials (steel, aluminum, etc.), homeowners, whether they have recently bought a home or have been homeowners for a long time with significant equity, should take proactive steps to mitigate the impact on their finances. Here are some strategies that can help:
For New Homeowners:
1. Budget for Inflation: Since tariffs raise the price of materials, services, and even
home improvements, it’s important to budget for higher costs across the board.
This includes everything from groceries to utility bills, repairs, and property
taxes. Prepare for a higher-than-usual cost of living by keeping track of inflation
trends.
2. Refinance Your Mortgage: If you’ve recently purchased a home and are facing
high interest rates or the threat of future increases, consider refinancing. By
locking in a lower interest rate, you can reduce your monthly mortgage
payment, which can free up funds to deal with rising living costs. Consult a
mortgage advisor to understand the best options.
3. Take Advantage of Local Housing Assistance Programs: Some local governments
offer subsidies or tax relief to new homeowners. Look into whether your area
offers property tax abatements, rent control, or other programs that could
reduce your overall financial burden.
4. Energy Efficiency Improvements: Rising costs can also be tied to higher energy
prices. Invest in energy-efficient home improvements (such as new insulation,
smart thermostats, or energy-efficient appliances) to reduce utility bills over
time.
For Long-Term Homeowners (With Plenty of Equity):
1. Leverage Your Home’s Equity: Homeowners who have built up significant equity
can consider options like:
a.) Home Equity Loan or Line of Credit (HELOC): If you’re facing short-term
financial strain, accessing some of your home equity could help cover higher
living costs. This is particularly useful for home repairs or other large
expenses that might come up due to inflation.
b.) Cash-Out Refinance: If interest rates are still favorable or you have a
considerable amount of equity, a cash-out refinance could allow you to tap
into your home’s value for other needs, such as paying down high-interest
debt, investing in home improvements, or simply padding your savings.
2. Rent Out Part of Your Home: With inflation and rising living costs, one way to
generate additional income is by renting out a room or a section of your
home (e.g., converting a basement or garage into a rental space). This can
help offset rising expenses like utilities and property taxes.
3. Review Property Tax Assessments: Property taxes often rise with inflation and
increases in property values. Ensure that your property tax assessment is
accurate. If your home value has not significantly changed, you may want to
appeal any increase in your property taxes. Some areas also offer tax relief
programs, especially for long-term residents or seniors.
4. Consider Downsizing: If you have considerable equity and your home’s costs are
becoming unaffordable, downsizing might be an option. Selling your home and
buying a smaller, more affordable property can free up a significant amount of
equity, which can be used to either invest, save for the future, or help cover
ongoing expenses.
5. Invest in Home Maintenance: Rising construction and repair costs could mean
that waiting on home maintenance or improvements will only make them more
expensive. Take advantage of your home equity to address necessary repairs
and maintenance now before costs increase further.
6. Prepare for Rising Insurance Costs: If tariffs are driving up the cost of
construction materials and labor, your homeowner’s insurance premiums may
also increase. Be proactive by reviewing your insurance policy and making sure
you’re adequately covered without overpaying. Shop around for better rates if
necessary.
General Strategies for Both Groups:
1. Increase Savings: Both new and long-term homeowners should prioritize
building an emergency savings fund to buffer against unexpected increases in
costs, such as home repairs, tax hikes, or changes in utility prices.
2. Cut Non-Essential Expenses: With the rising cost of living, it’s a good idea to re-
evaluate discretionary spending. Consider reducing costs on things like
entertainment, dining out, and vacations, and divert those funds toward home-
related expenses and savings.
3. Stay Informed About Tariff Impact: Since tariffs affect various goods, it’s
important to monitor how they influence the prices of materials and services
you may need, such as construction or home improvement services. By
planning ahead, you can avoid unexpected price hikes.
By taking these steps, homeowners can better position themselves to weather the impact of higher living costs, whether they’re just starting out or have owned their homes for years. Proactive financial management is key to minimizing the financial strain caused by inflation and rising costs.