Downsizing housing costs
Many consumers who are facing considerable debt develop repayment plans that involve curbing spending and downsizing their living costs. In many cases, cutting out luxuries, canceling cable packages and making other lifestyle changes can provide individuals with more income to chip away at their costs. However, housing costs typically constitute the largest monthly expense in a consumer's income, so finding ways to lower this expenditure can squeeze significantly more out of a paycheck.
The first and most immediate factor homeowners and renters should consider is whether they are already paying too much for housing. Experts agree that monthly housing costs should not exceed 28 percent of an individual's take-home pay. Paying more than this amount for housing can make it difficult to not only pay other bills, but to contribute to savings, pay off debt and put money away for retirement. This is especially true for renters who live in metropolitan areas that impose high rent prices. A recent CNNMoney article relayed that in cities such as New York and San Francisco, rent prices typically constitute more than 50 percent of an average renter's monthly paycheck.
Homeowners can reduce some of their costs by negotiating interest rates with their lender to lower their monthly payment. Many lenders will agree to cut homeowners a break if they enroll in automatic debit programs that allow their bank to deduct their mortgage payment from their bank account each month. Shopping around for more affordable homeowners insurance, and having the home appraised to ensure they are not paying too much in property taxes can also make a difference in how much homeowners pay.
When it comes to renting a home or apartment, location is everything. Those who are paying too much for rent can consider downsizing to a smaller unit or relocating to the outskirts of a city, where rent is likely to be more affordable, according to Fox Business. The same can be true for homeowners who are having difficulty making their payments and are in danger of defaulting on their mortgage.
Lastly, homeowners should consider refinancing their homes to make their payments more affordable. Refinance agreements may lower a homeowner's interest rate or change the length of their loan to make payments smaller. There are several eligibility rules and paperwork that goes along with refinancing, so entering housing counseling or working with a professional can help owners navigate the process.