At certain times over the years, you might find that your housing costs significantly increase. A huge increase can be a shock on a budget and you have to be prepared for it and know how to adapt.
The reasons for a housing increase can vary. Sometimes, the cost in an area might go up as the property value increases. This can affect you both as a renter and a home owner. If property values increase, your rent will go up on your next lease. Likewise, with rising property values, property taxes go up. This will lead to an increase in a mortgage payment on the next escrow adjustment.
Another big reason for a housing increase is when a change in family size occurs. With children comes the need for increased living space. There is a big difference between the cost of a one bedroom condo and a three bedroom house.
Whatever the case for your housing cost increase, you need to deal with it, so let’s take a look at some ways to do so.
Move To A Cheaper Area
This is fairly obvious but if you can not afford to live in an area, you might just have to move to a cheaper part of the city. The cost of living can vary quite a bit over the course of just a few miles. Sometimes, you might have to move out of the “hot” part of town.
Luckily, you generally have time to make the move. If you rent, you should receive notice of the rental price increase within about 2 to 3 months of renewal. If you own your home, you will receive a notice of an escrow adjustment several months before it kicks in. That will give you time to either move or sell your home. Not a fun solution but this is probably the most effective way to handle your housing increase.
Choose An Efficient Home
One way to negate the additional cost of housing is by choosing a home that is more energy efficient. Things have changed quite a bit in the last 20 years. A home built within the last few years will be much more energy efficient.
From first hand experience, I can tell you that an older home can easily consume three times the utilities of a newer home. You will use more gas and electricity in an older home. If you are in an older home and need to lower your costs, choosing an energy star rated home can save you 2500 dollars or more in a year.
If your reason for a housing increase has nothing to do with the need to increase your space, you can consider going the opposite direction. If you have no kids, do you need the second bedroom?
Downsizing can allow you to stay in the area that you like and keep your costs inline. You will save money in rent or mortgage payments and a smaller home will generally use less utilities.
Take On A Roommate
I am not incredibly fond of this option but sometimes you do what you have to do. If relocating is not an option, taking on a roommate might be the choice for you.
Ideally, you will be able to find someone that you know to move in with you. This will give you a bit of security. Second best is finding a friend of a friend so that you can at least get a referral. Put the word out on social media and you might be surprised at the response.
Your last resort is to find a stranger to move in with you. Take some of the risk out of this by using a service that matches roommates to rooms. Preferably one that does a background check.
Cut Other Bills
A budget readjustment might be in order if you need to stay put. Write down all of your bills and see where cuts can be made. This could be as simple as cutting out the satellite television in favor of a streaming service. It could also involve larger changes such as switching to a cheaper vehicle.
It might not be one or two changes that get the job done. It might take several little cuts that add up to enough savings to negate the housing cost increase. Start taking your lunch to work, shop your car insurance around or maybe choose a cheaper pre-paid phone service.Lot’s of ways to make some cuts.
Refinance Your Home
If you own your home, you may be able to offset the increased cost by refinancing.
This will be more likely to be an option if you have been in your home for several years. You might have 24 years left on your mortgage but stretching it back out to 30 years again could cut your payment enough to make it affordable.
In addition, if interest rates have fallen since you financed your mortgage, a rate decrease could offer substantial savings. On a 300,000 house, a 1 percent reduction in interest could result in almost a $200 drop in your monthly payment.