When it comes to buying a house, you need to consider your own personal finance situation. During the housing bubble, and during the loose lending standards that helped fuel it, many people fell prey to the idea of getting “more house for the mortgage.” Because of “creative financing” techniques like interest-only loans and adjustable rate mortgages with ridiculously low teaser rates, many people thought they could afford bigger homes. Of course, it soon became apparent that these homes weren’t as affordable as expected.
Why It Might Make Sense to Buy a Smaller Home
Right now, mortgage rates are low, and it can be a good time to buy a home — if you are ready. However, getting the biggest home you are approved for might not be the best idea. We were approved for a bigger mortgage than we ultimately ended up with, but we decided that a smaller home was the way to go. It fits our needs, and getting something bigger seemed superfluous at the time.
Indeed, we have found that it is much easier to live within in our means in our more modest abode. Here are some of the ways that a smaller home saves us money:
- Less expensive mortgage: This one is fairly obvious. You can save money in terms of your mortgage, since you will be borrowing less. However, you also save money in interest as well. That’s money that can be put to other uses.
- Lower property taxes: The bigger the house, the bigger the taxes. In a smaller home, we pay less in property taxes. We still have a yard big enough to play in, and we’ve made it nice. But we don’t have the big tax bill.
- Lower utility bills: One of the cost considerations that we took into account when buying a more modest home was the utilities. A bigger home costs more to cool, more to heat and more to take care of in general. We spend much less on power and heat in our smaller home.
- Lower maintenance costs: Smaller grounds, and a smaller house, mean fewer maintenance costs. We can take care of the yard ourselves, and the home is relatively easy to maintain.
- Less room for stuff: Indirectly, our home also helps us save money on purchases. Since we know we won’t have a lot of places to put new stuff, we are more conscious about our spending.