Why You Should Buy the Least Expensive House You Can Afford
The housing market has changed a lot in just the past few years. The old philosophy of buying the most expensive house you can afford has become obsolete. There are far more advantages to buying the least expensive house you can afford.
Consider some of the following . . . .
Lower Down Payment and a Lower Monthly Payment
Every expense and cash outlay that you have in connection with a house rises and falls with the price that you pay to purchase it. That includes your down payment. For example, if you purchase a $300,000 house, and need a 20% down payment, you’ll need to have $60,000 upfront. But if you opt instead for a less expensive house, say $200,000, your 20% down payment will be only $40,000.
That will leave you with $20,000 extra after closing on the home. This is more important than it seems on the surface too. The down payment that you make on a house can be thought of as trapped equity. That means it is capital sitting in the property, but unavailable for other purposes.
The same is true with expenses. A higher-priced home will result in higher property taxes and insurance, and if the house is also larger, you’ll have commensurately higher utility and maintenance costs.
One of the fundamental problems with both the down payment and the monthly expenses in regard to higher-priced homes, is that you essentially locked them in at the time you purchased the home. There will be no opportunity to lower those expenses after the fact.
More Money for Living Life – Avoid Being ‘House Poor’
The more money that you have tied up in the house – whether in the form of a down payment or a high monthly payment – the less you will have available for everything else in your life. At the extreme, a high-priced home could lead you to be house poor – owning a nice home, but having little room in your budget...