6 Reasons To Buy Less House Than You Can Afford
Written by
Crystal Mayer
Edited by
Gary Dudak
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While you may have always dreamed of having a mansion on the beach, buying a house at the top of your budget may not be prudent. Being “house poor” — having a home that eats up too much of your income — can put a serious strain on your finances. It can also diminish your quality of life if you are unable to afford to go on vacations or pay for things that bring you joy.
Savvy homebuyers, on the other hand, will ensure that they stay well within their means. According to Rocket Mortgage, you shouldn’t spend more than 33% of your monthly gross income on housing. If too much of your paycheck is going toward your mortgage and other household expenses, you may end up in financial misery.
If you want to keep your bank account healthy, here are six reasons to buy less house than you can afford.
Less Upkeep Costs Than a Big House
It isn’t just the mortgage of your home that will eat away at your paycheck. It is also the cost to upkeep the house. Big homes mean bigger expenses. Everything from heating or cooling the house to routine maintenance is going to cost more. If you have already stretched your budget just to afford the mortgage, then you might be unable to afford all of the other household expenses.
Buying a home that is under your budget will allow you to live comfortably. Depending on the cushion you give yourself, you should be able to put some money aside for upgrades and renovations as they come up without having to go into significant amounts of debt.
More Money to Invest
A smaller mortgage also means you will have more money to invest. Since your whole paycheck won’t be dedicated to living expenses, you’ll be able to better fund your retirement or create a robust emergency fund.
The more money you can set aside, the more peace of mind you can have when you go to retire. It can also give you a solid buffer if there is a sudden or unexpected cost. Your retired self will thank you when you are sipping margaritas on the beach instead of still having to sit behind a cubicle each day.
Better Quality of Life
Buying a home below your means can improve your quality of life. With less money going towards your mortgage, you’ll have more moolah for discretionary spending. You can put money aside for your next vacation if you love to travel or create a tropical oasis in your backyard.
Improving your quality of life begins by identifying the things that make you happy. Once you do that, you can put some of that extra income into those categories. Living paycheck to paycheck also causes an unhealthy amount of stress and anxiety. Giving yourself some wiggle room can help you breathe a little easier.
More Disposable Income
A little extra money can go a long way. Having disposable income can not only help to improve your quality of life by enabling you to do the things that bring you joy, but can also provide you with more stability.
When all of your income is not tied up in your house, you can use it to build wealth by investing, put it towards your child’s education, or spend it on season tickets for your favorite baseball team.
Less Stress About Your Mortgage
If you have bought too much house and are living at the top of your budget, what happens if you lose your job? An unexpected change in circumstances could leave you unable to pay your mortgage if you do not have a healthy savings.
Ensuring that your housing expenses stay at less than 1/3 of your income can do wonders for your mental health. You can sleep a little better without the worry of going into foreclosure because of a layoff or car accident.
Location, Location, Location
Finally, buying the biggest house in the worst location is probably not worth it. Instead, you may want to invest in a smaller abode in a better area. Think about your needs, including whether you have school-aged children or are nearing retirement.
All of these things should factor into not only the size of home you buy but also where you buy it. Maybe selecting a slightly smaller home with a smaller mortgage can allow you to live in a neighborhood with top-rated schools. You’ll want to weigh what you could be giving up in order to get the mega-mansion.
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