One of the most financially significant events in your life is purchasing a home. However, your financial task isn't over even after you've closed. You should take a few additional steps to integrate your home into your overall financial picture.
1. Budget Adjustments
Your monthly and annual expenses will vary once you buy a home, especially if you're a first-time homeowner. Even though mortgage payments are often less expensive than rent, homeowners with a mortgage pay an average of $8,609 more per year than renters.
It would be best if you could make rapid adjustments to your budget to ensure you stay within your limits.
You'll most probably need to budget for your mortgage, property taxes, and homeowner's insurance, as well as utilities and maintenance. Depending on how much your expenses climb, you may need to reduce spending in other areas of your budget, such as dining out and recreational activities.
2. Emergency Fund Rebuild
It is extremely common for people to face their savings account being completely drained after paying the down payments, closing costs, mortgage costs and the other expenses. However, building your emergency fund as soon as possible is tremendously important.
Despite having a good amount of money as a part of your emergency fund, it is always better to keep increasing your savings. According to experts, an individual must have at least three to six months’ worth of expenses saved in the form of a rain check fund. This obviously considers the more expensive tasks you would have to carry out after moving to a home you own.
3. Insurance Coverage Expansion
Your lender will require homeowners' insurance before you can close on your new house. But that is not the end of the insurance changes you would have to make.
Homebuyers should review their life and disability insurance policies. If you die, your spouse will be responsible for paying the mortgage and other house-related bills on his or her own. If you're no longer able to work or contribute to home-related bills, changing your coverage will help your family escape an uncomfortable financial position.
4. Tax – Strategy Revisit
Once you become a homeowner, a new realm of possible tax deductions is created including deductions associated with mortgage interest, property taxes, mortgage insurance and more. In maximum cases regarding these tax deductions, the advantages are available only if instead of taking the standard deductions, you start itemizing.
However, it is not always advisable for you to itemize your expenses. It would be a better idea to consult tax specialists who would be more than happy to help you and give you a tailored solution according to your financial needs.
5. Financial Plan Review
You should always keep in mind that after buying the new home, that is not the only priority you have. It is extremely important for you to prioritize your financial planning. This could be related to your child’s education or buying a new car.
In such situations, it always advisable to discuss with a financial planner and make decisions accordingly.