How to Make Optimal Money from Your Home
Who said your home had to merely be the place where you live, rest and enjoy the good life? Far from being an inert thing, your home can be a source of income, helping you affront debt or save up for the holiday of your dreams. In this post, we look into ways to make the most of your abode.
Significant Cost-Savings through Refinancing
Refinancing is an excellent way to lower your mortgage payments or pay off your loan faster. It enables you to avail of lower interest rates, which means you end up paying less for the same home. Reducing the length of your mortgage, say from 30 to 15 years, will also enable you to save more for the future, or use the newly available income to start a business or even purchase a second home. Refinancing a home has its costs, which include a new mortgage application fee, appraisal report, loan origination fee, a title search, etc. Some cities charge an extra fee for paperwork, so on the whole, be prepared to pay between $2,000 and $5,000 for refinancing.
Refinancing costs mainly make sense if you will be staying in the home long-term, thereby allowing the refinance to ‘pay for itself’. The costs may seem considerable, but by using an Excel spreadsheet to calculate your now-lower (or shorter term of) monthly payments, you will see that you can save tens of thousands of dollars by refinancing. If you are close to retirement, you might consider making your retirement income go further by taking out a reverse mortgage, which involves relinquishing equity in exchange for regular payments.
Renting Out Spare Rooms
Things can change considerably from the time we first buy a home to 10 years or more down the line. With children going off to college, you may find that you now have a large home with one or two bedrooms you could let out. Renting just one room could garner you over $10,000 a year if you charge in the region of $80 per week per bedroom.
Rent the Entire Home in the Summer
If you live in a coastal area or one that is a favorite summer destination, consider renting your entire home out for a couple of weeks while you are on holiday. Did you know that if you do so for less than 15 days per year, you will not need to report the rental as gross income on your tax return? Renting your home out also ensures that your home is safe and sound while you are away.
Downsize if Necessary
It may be wise to sell a big home and move to an apartment or a smaller home that is cheaper to maintain and keep clean. Selling your home also affords greater mobility, allowing you to consider living in another state which may have always interested you.
To make the most of your home, consider all the ways that you can pay a lower mortgage, or gain more income. Renting out spare rooms or your home can bring you a big cash boost, though if you feel overburdened by the need to maintain a large home, selling can be your best option.
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