Since your home is probably the biggest investment you have, it is a really good idea to create a financial plan to protect it.
What should you include in the Plan? What about including repairs, upgrades, mortgage, insurance and taxes in the plan. So many people are losing their homes because they did not plan for any of these items.
Once you have a handle on your home's expenses, you can devise a long-term strategy that will let you live there for years with maximum enjoyment and minimum worry.
The mortgage: Paying it. You already shell out a lot for your mortgage, but can you afford to pay more. Even a little extra each month adds up. If your mortgage is $200,000, and you have a 20 year fixed rate mortgage at 5%. Your monthly payment is about $1300. If you manage to pay an extra $100 per month you will end up saving almost $15,000 in interest. Not bad.
Insurance: Protecting you home. Homeowners Insurance should probably have full replacement coverage. This sounds simple, but be aware that you own not only your home but the land that it sits on as well. You may have paid $250,000 for you home but the replacement cost might only be $100,000 to rebuild it. Your policy limits should reflect this.
The differences are regional. Where land is at a premium, like Aspen, Colorado, a higher percentage of the purchase cost is for the property. Where land is cheap, like parts of southern New Mexico, most of value of a new home is in the house itself. Even in a shifting market the replacement costs won't change much.
You can ask your insurance agent about discounts. Making structural improvements can lover rates. Membership in certain groups such as Veterans' organizations may entitle you for some breaks on premiums.
Repairs and renovations: got to do it. Some changes you make are by choice and some by need. It is a good idea to have a house fund for those repairs that are needed. Your home is your biggest asset. All the financial advisors I know have said that you should resist the temptation to take care of repairs with a Home Equity Loan.
Taxes: Yes you have to pay them . If a bank holds your mortgage , they may already handle your real estate taxes with an escrow account. If so this expense is built into your monthly mortgage payment. Check your statement to find out if the taxes are included. In Taos, the property taxes are really low, but in some parts of the country the tax may be in the 1000's each year.
I hope I have encouraged you to create a financial plan for your home. Keep yourself covered. A good plan will give you peace of mind.
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