As prices for just about everything in Canada—from housing and electricity to vegetables—go up, I’ve been keeping a very close eye on my bottom line. I try to combat these increases by cutting costs where I can, from my home’s chilly temperature, to shopping the sales at grocery stores and walking, biking, and taking public transit, when possible.
Still, despite my diligent efforts, it seems like every time I check my receipts, I’m spending more than the year before—especially in the housing category. Property taxes increase, fuel costs creep up, and even insurance costs rise. That’s why in 2017 I’ve formulated a plan to decrease my housing costs by at least 15%. I’m tired of paying high housing costs, and now I’m going to attack them and bring them under control. Here’s what I’m going to do:
Pay my property taxes myself
If I were giving advice to a friend or family member on how to lower housing costs, the first words out of my mouth would always be “negotiate your mortgage rate” because many Canadians are paying a higher mortgage rate than they should, and their lender has room to negotiate and give them a lower rate.
Unfortunately, (or fortunately, depending on how you look at it), this isn’t an option for me because I shopped for the best mortgage rates when I bought my home back in July 2016. My mortgage rate is 2.29% for a five-year term, which is pretty spectacular in Halifax.
Even though I already have a great mortgage rate, there’s still room to reduce how much money I send my lender every month, without increasing the overall length of my mortgage. This year I’m planning to take over the payment of my property taxes myself.
When I purchased my home, my lender insisted that it pay the municipal property taxes on my behalf. My lender prefers this arrangement because it ensures they pay my property taxes on time and that my municipality won’t place a lien on my property due to unpaid property taxes (it happens more often than you’d think!)
To calculate how much property tax to collect from me, my lender estimates my property tax owing based on the previous year’s assessment and adds a 10% buffer. It divides the estimate into 12 equal payments, and it withdraws the payments with my mortgage payment every month.
Most lenders (mine included) offer you the option to handle property tax payments yourself but require a minimum loan-to-value (LTV) ratio to access this option. For my lender, the minimum LTV ratio is 90%. That means I need to have at least 10% equity on my property to be able to pay my property taxes myself. I didn’t have 10% equity last year when I bought the home, but I will this year.
When I take over paying my property taxes, I’ll be able to accurately assess how much I should save each month by using the assessment the city issues, and I won’t need to include that 10% buffer. I’m paying $275.78 to my lender for property taxes each month, so I expect to save $27 a month by paying them myself.
Paying my property taxes directly will not only save me money, but I’ll also earn more interest on the money I save in advance by putting it in a high-interest savings account instead of letting it sit in escrow with my lender, earning low interest.
Eliminating unnecessary rental fees
The seller of my home was an older woman and she was very concerned about not being able to maintain the house herself. Due to these fears, our home came with a few financial quirks. For example, the seller was paying $25 a month to an HVAC company to service her heating system in case of a failure or outage. She was also paying $27 a month to rent a hot water tank.
Now, I’m not the most mechanically inclined person, but my father has worked in the heating business for decades and my brother-in-law is a heating engineer, so I felt comfortable ditching the monthly $25 fee for emergency cold weather service of the clunky old oil-fired furnace. That was a simple change made over the phone with the HVAC company. The $27 hot water tank rental, on the other hand, is more complicated. The hot water tank is an equally old and also uses oil. I want to minimize our reliance on oil as a heating fuel as much as possible, so ditching the hot water tank will help save us that $27 fee every month and will also be better for the environment.
I’m planning to disconnect the old hot water tank this summer and install an electric hot water tank that I’ll buy outright for a few hundred dollars. Eventually, I’ll connect the electric hot water tank to the heat pump we plan to buy to replace the furnace, which will provide us with free hot water heating for part of the year.
Overall, we’ll expect to save about $40 per month through this arrangement.
Insulating the attic
The final prong in my three-pronged approach to reducing my housing cost this year is to insulate my home. My home was built in 1929, and if you run your hand along the exterior walls, it’s easy to tell that not much (if any) insulation has been added since then. The attic in particular, though finished, was clearly not insulated well. I know this because there have been some icicles accumulating along our eaves during snowy weather, which is a good indicator that a lot of heat is escaping through the roof and melting the snow.
That’s why this summer I plan to gut our attic, remove all drywall and flooring, and completely seal it up with spray foam insulation. Adding spray foam insulation will dramatically reduce the amount of heat that can escape through the roof deck, and reduce our heating costs accordingly. Gutting the attic and insulating is part of an overall renovation plan I have for the attic anyway, and government incentives should make this an economical way to keep our master suite warm in the winter, cool in the summer.
I expect insulating my attic to reduce my overall heating costs anywhere from 20% to 60%, which means I’ll be saving anywhere from $70 to $210 during the coldest winter months.
Overall, I expect these three tasks to reduce my housing costs by 15% this year. Reducing my housing costs by that amount will leave me with a more flexible budget that can better withstand stresses like job loss, injury, or pregnancy.