4 Underused Housing Hacks To Cut the True Cost of Homeownership

Once you buy a home, there are plenty of ways to trim around the edges of your budget. You can turn down the thermostat, shop around for homeowners insurance, or finally cancel that streaming service you forgot you had.

But none of those moves are likely to change the cost of homeownership in a meaningful way.

Some bigger savings opportunities are hiding in the mechanics of buying and owning the house itself: your mortgage terms, seller concessions, property tax assessment, and even how you use the property.

Here are four lesser-known strategies that could potentially shave some serious bucks on your housing costs. Note: We use a $400,000 home for each hack to show what the savings might look like.

1. Ask the seller to temporarily buy down your mortgage rate

Instead of negotiating only on price, buyers may be able to ask a motivated seller to pay for a temporary mortgage rate buydown.

With a 2-1 buydown, for example, the buyer's effective interest rate is reduced by 2 percentage points during the first year and 1 point during the second before returning to the full note rate.

Say you buy a hypothetical $400,000 home with 20% down and a $320,000, 30-year mortgage at 6.66%. Principal and interest would normally run about $2,056 per month.

With a seller-funded 2-1 buydown, the first-year payment would be roughly $1,652, saving about $404 a month. In year two, it would rise to roughly $1,849, still saving about $207 a month. Altogether, that's approximately $7,340 in payment subsidies over two years.

There is a catch: You generally still have to qualify for the mortgage using the full note rate, not the temporarily reduced one.

“The mistake buyers can make is shopping for the introductory monthly payment instead of evaluating the entire transaction,” says Romy B. Jurado, a Florida real estate and business attorney at Jurado & Associates. “The contract, financing terms, future payment, cash required at closing, and exit strategy all matter.”

Seller contributions also have limits. For Fannie Mae and Freddie Mac conventional loans on primary residences and second homes, financing concessions are generally capped at 3% above 90% LTV, 6% above 75% through 90% LTV, and 9% at 75% LTV or below. FHA generally allows up to 6%.

On our $400,000 home with 20% down, the applicable conventional limit would be 6%, or up to $24,000, subject to what the concession can actually be used for under the loan guidelines.

2. Take over a seller's low-rate mortgage

A seller with a 3% mortgage doesn't necessarily have to take that rate with them to the grave.

FHA and VA loans are generally assumable, meaning a qualified buyer may be able to take over the seller's remaining loan balance, interest rate, and repayment term rather than getting an entirely new mortgage.

The potential savings are huge. Suppose the seller of our $400,000 home still owes $320,000 on a 3% mortgage. Principal and interest on that balance would be about $1,349 per month, compared with roughly $2,056 if you borrowed $320,000 at 6.66%.

That's a difference of about $707 a month, or $8,484 in the first year alone.

But there's a reason everyone isn't doing this.

If the seller owes $320,000 but wants $400,000 for the house, you still need to cover the $80,000 equity gap, generally with cash or potentially other financing. You'll also need to qualify for the assumption, and the process can take longer than a traditional mortgage.

“An assumable mortgage can give a buyer access to a rate that may no longer exist in the current market, but a great interest rate does not automatically make it a great transaction,” Jurado says.

Rose Krieger, a senior home loan specialist at Churchill Mortgage, says assumable mortgages appear great at first, but the struggle lies in a couple of areas. 

“Coming up with the difference between the sale price and the seller's remaining balance can be difficult,” Krieger says. “Also, these loans take longer than the average of 30 to 45 days when using a more traditional loan. If the seller is relying on the sale to purchase a new home, the extended time added on may not work for them.”

3. Make part of your property pay you

That basement, garage, or detached structure could potentially do more than hold holiday decorations.

Depending on local zoning and permitting rules, homeowners may be able to turn unused space into a legal accessory dwelling unit, or ADU, and rent it out.

The numbers can be compelling. If an ADU at our hypothetical $400,000 property rents for $1,200 a month, that's $14,400 in gross rental income per year that could help offset the mortgage and other housing costs.

But $14,400 in rent isn't the same thing as $14,400 in savings. You may have construction and permitting costs upfront, plus ongoing expenses for maintenance, insurance, taxes, utilities, vacancies, and repairs.

“A good rule of thumb is to buy a home you can afford even if the ADU sits empty for a while,” says Doug Turner, wealth management advisor at Northwestern Mutual. “Rental income can absolutely help offset the cost of owning a home, but the reality is being a landlord comes with uncertainty.”

In other words, consider ADU income a way to make an already-affordable home cheaper. Don’t fall into the trap of being able to afford a home only if the rental income comes through.

4. Challenge your property tax assessment

If you think your home has been assessed for more than it's worth, you may be able to appeal your property tax assessment. The exact process varies by location. However, you could start by reviewing your property record for errors and pulling recent sales of comparable homes to see whether the assessed value looks reasonable.

For instance, say a $400,000 home is assessed at $400,000 and has an illustrative 1.5% effective property tax rate. That's a $6,000 annual tax bill. If a successful appeal lowers the taxable assessment by 10% to $360,000, the equivalent bill falls to about $5,400, which is a $600 annual difference.

That said, an appeal won’t guarantee you save money on housing costs. Tax rates, exemptions, assessment practices, appeal deadlines, and how frequently properties are reassessed in your area will inevitably vary. But unlike cutting a one-time expense, a successful appeal could potentially lower a recurring housing cost for you.

A housing hack still has to fit your budget

These strategies aren't equally useful for every homeowner. A 2-1 buydown eventually expires. An assumable mortgage might require a large amount of cash upfront. An ADU comes with landlord responsibilities. And a property tax appeal might go nowhere.

The common thread is looking beyond the sticker price and monthly mortgage payment for places where the math can move in your favor.

As Turner puts it, “The bigger question isn’t, ‘Can I lower my payment?’ It's, ‘Does this still make sense when I look at everything else that comes with owning the home?’”