5 Financial Moves Every Smart Homeowner Should Make This Year
- Staff Desk
- Apr 29
- 6 min read
Updated: Jul 11
Smart Homeowners
Owning a home has its advantages and disadvantages. While it’s easy to focus on monthly mortgage payments and home maintenance, there’s a deeper financial layer to homeownership that often goes overlooked. From managing rising utility costs to preparing for emergency repairs and maximizing your home’s value, being financially strategic can make all the difference. If you're not actively managing the financial side of homeownership, you could be leaving money on the table.
The reality is that the housing market, interest rates, and even climate events are all evolving in ways that impact homeowners directly. That’s why making smart, informed financial moves that protect your property and peace of mind is more important than ever.
Whether you’re a new homeowner or have lived in your house for years, this is the perfect time to take a closer look at your financial game plan. These five essential money moves will help you learn how to grow your equity, boost your home’s value, and prepare for both expected and unexpected life events.
Create a Home Emergency Fund
One of the first things every smart homeowner should do is set up a dedicated emergency fund for home-related expenses. This fund should be set aside specifically for unexpected repairs or maintenance. From a leaky roof to a broken water heater, home issues tend to pop up without warning. A good rule of thumb is to save at least 1% of your home’s value annually. So, if your home is worth $300,000, stash away $3,000 per year in a separate savings account.
This fund can prevent you from racking up credit card debt or taking out high-interest loans when something breaks. It also gives you peace of mind. Instead of stressing over how to cover a sudden $1,500 plumbing issue, you’ll be able to handle it quickly and confidently.
Review Your Home Insurance Coverage
Your home insurance policy shouldn’t be a “set it and forget it” deal. Many homeowners sign up for a policy when they purchase their home and never revisit it. You could be missing out on savings or lacking the coverage you need. If your home’s value has increased, or you've renovated or purchased expensive personal items, your existing policy might fall short.
Make it a point to review your policy annually. You need enough dwelling coverage to rebuild your home at today’s construction costs. If you've added features like a deck, sunroom, or finished basement, inform your insurance provider so they can adjust your coverage accordingly.
Consider bundling your home insurance with other policies like auto insurance to lower your premiums. Some companies offer discounts of up to 25% for bundled coverage. Taking the time to reassess your policy could lead to better protection and lower monthly costs.
Budget for Home Improvements
Home improvements are seen as a luxury but can also be a wise investment when strategically planned. Upgrades can increase your home’s value, improve energy efficiency, and make your space more enjoyable. The key is to plan ahead and budget wisely so you’re not caught off guard by costs or financing options.
One area where homeowners often see great returns is the kitchen. A full kitchen remodel can be expensive, with national averages ranging from $15,000 to $50,000 depending on the size and finishes. But even a minor kitchen update, like new cabinets, appliances, or countertops, can yield a high return on investment when it comes time to sell.
If this type of project is on your radar, be sure to factor the cost of a kitchen remodel into your annual financial planning. Setting aside funds monthly for a planned project is a smart approach. You’ll avoid taking on unnecessary debt and may even be able to pay cash in full.
Monitor Your Property Value
Understanding your home’s market value and equity is important for long-term financial planning. Equity is the difference between your home’s current market value and what you still owe on your mortgage. The more equity you have, the more financial flexibility you gain.
Check in on your home’s value at least once a year. Tools like Zillow, Redfin, or your local property assessor’s site can offer estimates. You can also consult a real estate professional for a more accurate picture. If your neighborhood is growing or homes nearby are being renovated and sold, your property’s value could rise without you realizing it.
Once you know your home’s equity, you can use that information to make strategic decisions. For example, if you’ve built significant equity, you might refinance for a better interest rate or take out a home equity loan to finance smart renovations. The more informed you are, the better your financial choices will be.
Optimize Your Tax Liability
Beyond the immediate costs and payments of homeownership, there are significant tax implications that smart homeowners can leverage to their advantage. Understanding these benefits can lead to substantial savings on your annual tax bill.
Mortgage Interest Deduction: For most homeowners, mortgage interest is a significant deductible expense. The IRS allows you to deduct interest on up to $750,000 of mortgage debt ($375,000 if married filing separately) for loans taken out after December 15, 2017. For older mortgages, the limit is $1 million. Your mortgage servicer provides Form 1098 detailing this interest annually.
Property Tax Deduction: You can deduct state and local property taxes, though this is subject to a $10,000 limit ($5,000 if married filing separately) when combined with other state and local taxes (SALT deduction). This can be particularly beneficial in areas with high property taxes.
Home Equity Loan Interest: If you've taken out a home equity loan or line of credit (HELOC) and used the funds for substantial home improvements (like a kitchen remodel or adding a room), the interest paid on that loan may also be deductible. It's crucial to note that the funds must be used for home improvements to qualify for this deduction.
Energy-Efficient Home Improvements: The government encourages energy efficiency with various tax credits. For example, the Energy Efficient Home Improvement Credit allows you to claim a percentage of the cost of certain energy-efficient upgrades, such as new windows, insulation, or heat pumps. The Residential Clean Energy Credit offers a 30% credit for renewable energy equipment like solar panels. These credits can directly reduce your tax liability dollar-for-dollar.
Capital Gains Exclusion: When you sell your primary residence, you may be able to exclude a significant portion of the profit (capital gain) from your taxable income. For single filers, you can exclude up to $250,000 in profit, and for married couples filing jointly, this limit is $500,000.
Other Potential Benefits: While not direct deductions, some tax incentives, such as the child tax credit, can indirectly support homeownership by freeing up household income. That money can then be directed towards home maintenance, improvements that increase value, or even making extra mortgage payments, thereby enhancing the financial stability that underpins sound homeownership.
It's always recommended to consult with a tax professional to understand how these deductions and credits apply to your specific financial situation and to ensure you're maximizing your tax savings as a homeowner.
Set Up Your Mortgage Payoff Plan
Your mortgage is likely the biggest debt you’ll ever have, so it’s worth looking at your repayment strategy yearly. Small adjustments can shave years off your loan term and save you thousands in interest.
If you’re financially stable, consider making at least one extra mortgage payment yearly. This simple move can make a big impact. Check with your lender to ensure the additional payment is applied to the principal, not future interest.
You should also stay on top of interest rates. Refinancing might be a smart option if rates have dropped significantly since you purchased your home. Even a one-point drop in your rate can lead to substantial monthly savings. Just weigh the closing costs and long-term benefits before making a move.
Final Thoughts
Homeownership is a financially demanding journey. The more proactive you are, the better positioned you’ll be to protect and grow your investment. From emergency funds and insurance reviews to smart renovations and mortgage strategies, each of these five financial moves can bring more stability and opportunity into your life as a homeowner.
It’s about building a solid foundation that allows you to confidently enjoy your home. Whether you plan to stay in your home for the long haul or eventually move on, these smart decisions will set you up for success now and well into the future.
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