Rethinking financial goals after COVID-19 for first-time homeowners
Tuesday, 21 July 2020
Buying your ﬁrst home can be an exciting milestone. However, the recent economic downturn caused by the COVID-19 outbreak could make the responsibility of being a homeowner seem a bit overwhelming right now.
In most cases, owning a home is still a good investment and so far the pandemic has not had a major impact on the U.S. housing market. With that in mind, here are some tips for protecting your investment and your wallet during this time and even preparing for the next chapter in your home.
Keep your mortgage current
Good credit made it possible for you to buy your home, and keeping your credit score strong will be important going forward as well. Staying current with your mortgage payments is key. Not only will it protect your credit score, but late payments may result in hefty fees and not paying your mortgage for several months could possibly cause you to lose your home.
If your income has been aﬀected by the pandemic and you cannot make payments, contact your lender. Banks and mortgage lenders understand many of their customers are struggling now and could oﬀer some relief. But you need to reach out to them before you start missing payments in order to protect yourself and your home.
Take care of your home
Depending on your situation, you might have to put major renovations or improvements on hold for the time being. However, it's important for you to continue with routine home maintenance in order to keep your home safe and comfortable and protect your investment.
You may be able to do many small, inexpensive jobs yourself, such as changing the ﬁlters in your HVAC system and putting a coat of water sealant on your deck. Others, like servicing your HVAC system, cleaning gutters and repairing plumbing leaks, might require the help of a professional. Shopping around and getting recommendations from neighbors can help you ﬁnd reputable, aﬀordable service providers.
For most people, their home is their greatest asset. Keeping your home in top shape will help it hold its value—which is key when it comes time to sell or use your home's equity for borrowing purposes.
Find ways to save around at home
You've probably realized by now that owning and maintaining a home can be expensive. But there are ways you can reduce those costs. According to the U.S. Department of Energy, American's spend an average of $1,400 on energy each year, the majority of which is allocated toward heating and cooling. Installing a programmable thermostat and making sure your home is as insulated as possible can help reduce your monthly energy expenses.
Minimizing your energy costs might not seem like much, but if you look for ways to save throughout your home, such as learning to do your own repairs, changing light bulbs and using less water, the savings can really add up. And when you're struggling and need to make a mortgage payment, every penny counts.
Make your mortgage work for you
Interest rates are super low right now, which means if you're in a position to, it could be a good time to borrow or reﬁnance. Home equity borrowing is one of the most aﬀordable options. If you were able to make a sizable down payment or have lived in your home a few years, you could have enough equity to qualify for a home equity loan or line of credit.
A line of credit is another option because it gives you ﬁnancial ﬂexibility. You don't have to use it if you don't need it, but if a major home repair or unforeseen expense is necessary, you'll have easy access to cash.
If you've had your mortgage for at least one year, most banks will allow you to reﬁnance. With interest rates currently at an all-time low, reﬁnancing could lower your monthly payment and you'll pay less interest in the long run. However, you should plan to stay in your home for several years after you reﬁnance to recoup your closing costs.
Do your research
Some ﬁrst-time owners consider their home a “starter home," and plan to stay only a few years before trading up to something bigger or better. If you are considering a move, it's smart to keep your eye on how the pandemic is aﬀecting the housing market. Although you may be able to secure a deal on a mortgage, if the United States is heading toward a recession, it will likely have an impact on home values and prices. Understanding what's going on in the market if you're planning to move is essential to helping you make smart ﬁnancial choices.
The COVID-19 crisis has had a dramatic impact on the lives and ﬁnances of most Americans. And while you don't have to put your plans and goals on hold forever, it's important to be mindful about your ﬁnances now so you can be positioned for a healthy ﬁnancial future.
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
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