Plan out the story of your movie. Check through your house, garage and personal items to see what you can implement into the story. For example, if you own a metal rake, that can be used as the killer's signature weapon. If you own a mini-trampoline, it can be used for stunts. An old tree house can easily become a haunted tree house.
Cast your friends and family into the movie. They will work for free and keep your production budget low. Make characters based off of them. For example, if your mother is a teacher, cast a teacher in the film -- she can wear work outfits and use supplies as props.
Use food products to make fake blood and gore. There are several cheap fake blood recipes available from Halloween Web, or you can also find household items you can use for the blood.
Use a tripod with your video camera. "The Blair Witch Project" was a success without a tripod, but you really need one to make the film viewable. A tripod will enable you to be a part of the on-camera action too.
Tape several angles of each scene. It will give you a lot to work with in editing and a lot of quick scares can be provided with the quick cuts.
Build the mystery while filming. For example, if you have a giant monster in the story, do not show him until near the end of the film. You will save on budget and time by not showing your creature a lot and you'll keep the viewers intrigued.
Apply a dark blue transparent film over your lens. This will give you instant night during the day and allow you to add a creepy look no matter what time you tape.
Record evil-looking people from a lower angle. It will give them a towering look that makes their character more menacing. Shoot the victims from above to give them an innocent look.
Watch weather reports and use the elements to your advantage. For example, get some footage during a thunderstorm, windy day or snowstorm that you can filter into the story. It will add production values to the project.
Find copyright-free horror music from various websites. Freeplay Music, for instance, has a large collection of tracks that are perfect for low budget movies.