It is not uncommon for housing to be a person’s biggest monthly expense. Often times, owning a home is much more expensive than renting. This is because homeowners have to cover costs outside of their mortgage payments, like property taxes, insurance, maintenance, and repairs.
It is important not to overspend on housing, as it could lead to financial hardship and unhealthy debt. But according to a recent report from Hometap, millennials could be overdoing it when it comes to housing. And it could really hurt them financially.
Millennials stretch their budgets
Hometap reports that Millennials spend more of their income on housing than any other generation. But what’s more alarming is that about 33% of Millennials spend more than 26% of their income on their mortgage payments.
As a general rule, housing expenses should be kept at 30% of your income or less. But “housing costs” include more than just a mortgage.
Specifically, that 30% figure should include predictable homeowner expenses, such as property taxes, home insurance premiums, and HOA fees, if applicable. While some millennials are already spending 26% of their income on a single mortgage, it’s fair to assume that many exceed that 30% guideline – and put themselves at risk of falling behind on their bills across the board.
How to reduce your housing costs
If you’ve ever bought a home that was a bit difficult for you, you might not have too many options to sell it and buy a cheaper one, especially not in today’s market where house prices are on the rise across the board. . But that doesn’t mean you can’t lower your existing housing costs.
If your mortgage is consuming too much of your income for convenience, you may want to consider refinancing it. This means swapping out your existing home loan for a new one – ideally, one with a lower interest rate to lower your monthly payments.
You can also try to appeal your property taxes if they have gone up a lot. That said, this year it can be a difficult thing to do due to the increase in home values (the more your home is deemed worth, the higher your property tax bill is likely to be).
Another option is to call your home insurance company and see if it is possible to negotiate your premiums. You may have invested in security features, such as an alarm system, and therefore qualify for a reduced rate. And remember, there is no rule that says you have to use the same home insurance company forever. You can always look for better rates if your current insurer refuses to negotiate.
It’s no surprise that Millennials are spending a lot of money on housing, especially given today’s property values. But it’s important to limit the amount of your income that goes towards owning a home. If you’ve taken yourself too far in this regard, it pays to see if there are steps you can take to lower your housing costs and ease that financial burden.