The stereotype of bigger as better in real estate is getting a wake up call. Today, compact living and saving money is the trend, and people are doing it in droves. The adventuresome generation of today does not spend much time at home anyway, so having to pay for square footage and resources that are really not being used takes money away from travel.
If you are looking to join in this exciting trend, or if you are interested with concerns, here are 10 ways in which compact living saves people big money for other pursuits.
1. Will I immediately save money from a smaller square footage?
The Spartan nature of these houses is the primary reason that all of the costs of living in compact houses are drastically reduced. A smaller square footage means that all utility costs are reduced exponentially. The up front cost of the house is also reduced, as smaller properties simply do not cost as much as big lots. You save money immediately and down the road.
2. What about the utility costs?
Even if you turn on the AC all day in a compact property, you will only spend a fraction of the money that you would in a normal house. The smaller square footage means that the HVAC systb does not have to work as hard to modify the tbperature, and this power exertion from the work is what you are actually paying for. Make sure that you keep the doors and windows closed when the AC is on, but otherwise, enjoy the cheap climate control.
3. Are there less repairs?
Because there is less house overall, there are less things to break. Repair costs for compact properties are low because of the reduced amount of stuff as well as improved infrastructure. Compact things in general rbain more durable over time, and the same is true of compact properties.
4. What about property tax?
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You save money immediately on property tax. Property tax is assessed as a fraction of the home price, and because compact properties do not cost as much, the government cannot take as much from you.
5. Is there a homeowner’s insurance charge?
Because of the improved durability of compact properties, home insurance costs are also lower. Insurance is also assessed as a fraction of total home price like property taxes. As such, the insurance on a lower priced property is also lower. There is also less to ensure, making the house less of a risk to the underwriting company. This savings is eventually passed down the chain as a lower rate to the home resident.
6. Are the closing costs for compact properties lower?
You will not only save on a compact property while you are living in it, but you will also save on it during the purchase as well. Closing costs are assessed in the same manner as property tax and home insurance. The one to two percent fraction of the home price that you will pay to get into your home is much lower, again, because of the lower price of the home itself.
7. What about the down payment?
The down payment for a compact property is lower as well. Most lenders will require the borrower to put down 20 percent of the total home price up front as cash for the down payment. Many people flock to compact properties because of their affordability and put down much more, but 20 percent is usually the minimum if you want to avoid private mortgage insurance (PMI) payments. The reduced down payment is usually redirected into improving the amenities within the home.
8. Can I buy a compact home cash?
Compact homes cost less for the reasons mentioned above and for many other reasons. The pricing of these properties actually brings the total cost of the home down into the actual cash budget of many would be property owners. Purchasing a home with cash completely eliminates many of the costs mentioned above, including closing costs, lender fees, and many other charges from third party entities.
Buying a home cash also saves a home buyer the interest that a lender would charge on a loan. This alone saves the homeowner tens or even hundreds of thousands of dollars. Getting rid of the interest payments to the bank is one of the biggest cost savings in real estate, so do it if you can.
9. How much do I pay in lawn maintenance?
The compact properties usually stand on smaller plots of land, meaning that there is less of a cost for lawn maintenance, pest control, and landscaping. As a matter of fact, the yard space is small enough for the homeowner to take care of the surrounding property himself. This is exactly what many compact homeowners do, eschewing the cost of yard maintenance on top of all of the other charges mentioned here.
10. What about the sell price?
Many people do not believe the equity in a home or the selling price of the home to be a cost savings; however, improving equity in a home saves you money in having to borrow from an outside source at a higher interest rate. The sell price of a home is also a savings in the form of more profit.
2 Point Highlight
Many people flock to compact properties because of their affordability and put down much more, but 20 percent is usually the minimum if you want to avoid private mortgage insurance (PMI) payments.
Many people do not believe the equity in a home or the selling price of the home to be a cost savings; however, improving equity in a home saves you money in having to borrow from an outside source at a higher interest rate.
