These 3 Steps After Closing Can Save Buyers Thousands of Dollars Every Year

Homebuyers who put down a big portion of their savings at closing might be thinking of ways to start building up their account once again.

Between the down payment and all of the fees needed at closing, the final check could be well into the tens of thousands. So, starting to save begins with doing research.

Zell Melendez, a real estate broker with Berkshire Hathaway in Massachusetts, shared his tips on a Facebook Reel. He explains how homeowners can save thousands every year by doing a little bit of research.

Tax exemptions

If the home you are buying is your primary residence, Melendez suggests checking to see if you qualify for any residential tax exemptions.

“This can lower your property tax bill significantly,” says Melendez. “Check with your local assessor’s office.”

The IRS explains that most homebuyers take out a mortgage to buy their home and then make monthly payments to the mortgage holder. This payment might bundle other costs of owning a home.

The costs the homeowner can deduct are state and local real estate taxes, subject to a $10,000 limit. There’s also home mortgage interest, within allowed limits.

Not everything is tax-deductible. Homeowners can’t deduct any of the following items:

• Home repairs

• Insurance, including fire and comprehensive coverage and title insurance

• Amount applied to reduce the principal of the mortgage

• Wages paid to domestic help

• Depreciation

• Cost of utilities such as gas, electricity, or water

• Most settlement or closing costs

• Forfeited deposits, down payments, or earnest money

• Internet or Wi-Fi service

• Homeowners association fees, condominium association fees, or common charges

• Home repairs

Bundled insurance

Bundling is when a carrier combines several packages or services as one, resulting in a discount.

Homeowners insurance is most commonly bundled with auto.

Melendez explains how he got multiple bids for his home insurance and bundled it with his auto policy.

“Even though my car insurance increased slightly, my overall savings was $300 to $500 per year,” says Melendez.

 A Consumer Reports survey found 31% of homeowners switched to get a better bundled rate. It explained that homeowners insurance is based on the cost to repair your home if it’s damaged or to rebuild it if it’s destroyed.

Escrow

Putting your homeowners insurance into an escrow is a common practice, but not necessarily required.

An escrow is money held by a third party (in this case, the lender) on behalf of the borrower.

“Depending on your lender’s requirements, you may be able to handle your own property tax and insurance payments instead of rolling them into your mortgage,” Melendez says.

There are two ways to pay property taxes: paying through your mortgage or paying your tax office directly. For the latter, your tax office will send the property owner a bill. This can save you money than putting in an escrow because you will know exactly how much is owed. The downside is that a homeowner needs to be responsible for setting aside the money for the large payment.

If you pay through an escrow, your lender collects a portion of your annual property tax bill along with your mortgage payment. You’ll be able to find the breakdown in your closing documents.

A homeowner can also confirm the total annual payment by checking Box 10 of your IRS Form 1098. Your lender is required to send that form to you, if you paid $600 or more in mortgage interest during the tax year.

If your lender overestimates or underestimates your tax bill, you could receive a refund—or owe more to cover the difference.