What Money Problems Should Homeowners Prepare For?

There are plenty of responsibilities you’ll have to take on as a homeowner. You’ll have to mow the lawn, clean out the gutters, and pull-out weeds that try to take over your flower beds. You’ll have to sweep and mop to keep your floors clean. You’ll have to make sure that food is always in the fridge and toiletries are always in the bathrooms. You’ll have to do the laundry several times a week to stop dirty clothes and linens from piling up in hampers. And most importantly, you’ll have to carefully manage your finances. 

Read ahead to find out what financial problems you might face as a homeowner and what you can do to resolve them. 

Problem #1: Rising Interest Rates

What kind of mortgage do you have? Is it a “fixed-rate mortgage” or an “adjustable-rate mortgage”? A fixed-rate means that your interest rate on your mortgage loan will stay the same — until you renew or refinance the loan. An adjustable-rate means that your interest rate can change throughout the mortgage repayment process, moving higher or lower to match the market rate.

If you have an adjustable-rate mortgage, you should prepare your budget for potential rises and falls in interest. After all, adjustable-rate mortgages were a major reason that borrowers had trouble paying their loans during the 2008 financial crisis. 

You could also refinance your mortgage to switch from an adjustable-rate agreement to a fixed-rate one. However, timing is key when it comes to refinancing. If interest rates are high, your refinancing options might not be that beneficial. This year, the refinance demand is dropping because interest rates are currently high. So, you may want to wait for a more rewarding opportunity.

Problem #2: Household Emergencies

You never know when a household emergency will crop up. The hose on your washing machine could burst and flood your basement, your roof could spring a leak during a rainstorm or a windstorm could break a window. 

Your homeowner’s insurance should help you manage the costs of repairs and replacements in these emergencies. However, you will still need to cover the costs upfront before you send in the insurance claims and wait to find out how much coverage your insurer will offer.

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This is why you should have an emergency fund. With a substantial emergency fund, you can withdraw the necessary amount of cash to cover the urgent repairs and keep the receipts for your insurance company. 

What can you do without an emergency fund? You could look to credit alternatives, like a credit card, personal line of credit, or a cash advance loan — click here to learn what are cash advance loans and what qualifications you need to apply for one of them online. The benefit of a credit alternative is that you can cover the emergency expense quickly and then focus on repayments afterward.

Problem #3: Late Mortgage Payments

Missing a single mortgage payment is a problem. Missing more than one is a crisis. If you’re several months behind on mortgage payments, your lender could begin the foreclosure process, and you could lose your house.

If you know that you’re going to miss a mortgage payment, contact your lender right away and explain the situation. They could waive late fees, suspend the payment or find a solution to help you get back on track. If you’re in serious financial trouble, you might be able to request for bearance to avoid going into foreclosure. Talk to your lender about this option. 

Don’t wait. Prepare for these money problems before they happen.