5 Things Every First-time Home Owner Should Do
Just moved in to your new house?
Okay, from being a first-time homebuyer, you’ve just become a first-time homeowner. Yes, it’s an exciting time, and you deserve it.
But now that you’ve moved most of your things and finally settled your family down, then you might be wondering what’s the next step.
Well, guess what? Your life as a new homeowner just gets started. Your next job is to protect your home. This means you will have to ensure that it will be a great place to live and it will be yours for the long haul.
With that said, here are your top 5 priorities as a new homeowner:
1. Remodel Your New Home
Let’s admit it, you and your spouse have your own idea of a dream house. In fact, every family does; not just couples.
So, if you’ve just bought a new house, one thing that you’re excited most to do is giving it your personal touches, design-wise. If this is the case, a remodeling is in order.
Take note that deciding to remodel your new home is not just about pampering your aesthetic taste. More than anything, it’s about making sure that your new house will live up to your own standard of a decent and livable home for the family.
Specifically, what we’re talking about here is the nitty-gritty details of homeownership that involves keeping every nook and cranny of your house as functional and as secure as possible.
This means you have to check the rooms, the floors, the ceilings, the walls, the garage, the light fixture, the pipes, and basically, the whole infrastructure. This is where you should start before you dive in and make any major changes in the backyard or your front lawn.
When everything is checked and fixed, you can begin altering structures one at a time if you find it necessary. You can choose to build a patio, install some cladding, or just construct anything.
Most people prefer to do all these things before they move in, but the best practice is to live in the house first so you can discover yourself where the changes are needed. When you’ve finally determined the things that you want to fix, design, and install, then you can already start remodeling step-by-step.
The point is, your remodeling project should be geared towards your family’s comfort and security. It’s the only way that you can truly enjoy your new home and make it safe and convenient for the family.
2. Get Insurance
As a first-time homebuyer, one of your biggest priorities should be ensuring that this latest investment is protected. And you can do this by getting an insurance.
There are several types of insurance that you can get to protect your home. But let’s get down to the most essential policies.
The most common and very important is a home insurance. It’s the standard home insurance policy that provides dwelling coverage. It covers your loss in case of fire, theft, and other types of unfortunate events that cause property damage.
Most of the time, the home insurance also includes content coverage which pays you the exact amount of the items you lost inside your home due to an incident.
It is also typical for home insurance policies to have a personal liability coverage. This takes care of medical expenses in case someone gets injured in your property. It also covers costs if your property was damaged as a result of an accident.
When you get a home insurance, you should choose wisely in terms of coverage add-ons because it might matter a lot financially when you’re trying to rebuild.
Most standard insurance policies do not cover property damage caused by flood and earthquake. It would be best that you also consider this additional coverage, especially if you live in an area where there is a potential risk for these types of calamities.
It is perfectly understandable if you want to save as much as possible from insurance policies. Additional coverage costs money, but looking for the most affordable policies doesn’t always help. The best practice is to get the most ideal and cost-effective home insurance without under-insuring your home.
Another type of insurance that you should get is life insurance. Most people don’t realize how a life insurance can actually be a lifesaver when it comes to financially protect your home.
“Adding a mortgage to your liabilities is another reason to be wary of what responsibility you leave your partner with. Life insurance is something every new homeowner should consider” says Jason, founder of CFAinsure.
If you’re the only breadwinner, your death will be very devastating for your family. Without your financial support, it would be very hard for them to keep paying the mortgage. They might struggle financially and eventually lose the house. But this would not be the case if you have a life insurance.
In the event of your death, the benefits from your life insurance can be used by your family to pay the mortgage. Many insurance companies provide a mortgage life insurance policy for this exact purpose alone. But the truth is, any type of life insurance can help your family cover the mortgage payments and pay for the other expenses even when you’re gone. It’s up to you to choose.
3. Save those Home Improvement Receipts
This may seem odd, but believe it or not, those home improvement receipts can help you save tons of money when you decide to sell your home.
Here’s how it works.
When you sell your home, you pay the IRS a percentage of your profit. Now, where does this profit come from?
First of all, think about the selling price you set for your home. Now, add the original cost of your house when you bought it and the total amount you spent on home improvements. The sum is your home’s tax basis.
When you deduct the tax basis from the current price of your home, the difference is assumed to be your profit or gains. And that’s taxable.
Essentially, if your home’s tax basis is greater, it means you have lesser gains. And lesser gains mean lesser tax to pay.
Based on the law, if you have lived in your home for at least two years within five years before you sell the house, your profit is tax-free if it amounts to $250,000 and if you are single.
If you are selling the house with your spouse (which means you’re married), the cap amount for a tax-free profit is $500,000.
Now, let’s use an example.
Let’s say that you bought your house for $350,000. If you’re selling it now for $800,000, you have a gain of $450,000. If you are single, the $250,000 of the $450,000 will be tax-free, but you will owe the IRS a tax for the $200,000 difference. If you are married, you will not pay any tax because the cap for the non-taxable amount is $500,000.
And here we come to the point. If you’ve kept the receipts of all your home improvement projects, you can add all those amounts to the original price of your home. The sum will be your adjusted home tax basis. The bigger this amount, the lesser tax you will potentially pay.
To make this clear, let’s use another example.
Let’s say you’re a married couple and you’re selling your home for $950,000. If your purchase price for the home is $350,000, your taxable profit from the sale will be $100,000 because the $500,000 is tax-free.
If you’ve made some home improvements and kept the receipts as proof, you can potentially get away with the home-sale tax-free. That is, of course, if your total home improvement costs amount to no less than $100,000.
Take note that any home improvement project is different from repairs. When we say home improvement, we’re talking about those projects such as a room addition, roof replacements, centralized AC installation, building a swimming pool, and the likes.
Every time you have a home improvement project, keep track of your expenses and keep the receipts. Organize them and keep them somewhere safe. You can also take photos of these receipts so you can have some backup copies.
4. Save Money and Pay Extra for the Mortgage
Your mortgage payment most likely makes up the biggest chunk of your family budget every month. Paying for your home is the topmost priority, and unless you do something to make it less painful on your wallet, it will remain so for many years to come.
But it’s not as if you don’t have any other option at all. If you’re earning extra money and you can afford to save a few amounts every month, it would be best to set aside some of this money for your mortgage payments. Consider it as your personal mortgage fund.
If you have a chance, use this saved money to make an extra payment for your mortgage at least every year. This way, you will be able to save on the monthly interest because your extra payment is paid on the principal amount of the loan.
The more you pay extra, the more you cut months from the term, which helps you reduce your payment and avoid the interests.
Before you knew it, you’ve already paid off your loan early and faster than you thought you can. With some extra funds at hand, now you can’t take that family vacation.
The point is, by just saving extra money every month and allotting this fund for your mortgage payments, you will be able to save more money in the long-term.
And the best thing about this practice? Well, you don’t need to refinance as most people do when they wish to pay their home mortgage off early.
5. Know Your Home
It takes time to really get adjusted to your new home, but learning more about your house can save you a lot of stress and money from potential troubles.
You might not know it immediately, but a portion of your house may be too weak, a part may be prone to flooding, or some pipes are not installed properly. The possibilities are endless.
The last thing you need is to discover these things late and you will end up losing more money from repairs.
Another advantage of knowing more about your home as soon as you moved in is you will find the most vulnerable areas and uncomfortable spots.
For example, maybe you’ll find it necessary to install more security systems. Or there might be areas in your home where the sunlight hits directly and it makes the place practically useless.
By checking it yourself early, you can plan ahead and resolve the issues. Either you can do some DIY repairs or ask a contractor to do it for you.
Be a Smart Homeowner
Owning a new house is a great achievement, but your work as a new homeowner doesn’t end after you’ve signed the paperwork and moved in. There are still things that should be done.
The aforementioned tips are just a few of the biggest priorities that you should consider as a new homeowner, but doing these things is already a good start.
Remember, your ultimate goal must be to keep your home protected and ensure that your family is always safe, secure, and comfortable in your new abode.