I think it's easy for many of us (myself included) to make emotional decisions that make very little financial sense. Home ownership in inherently riddled with emotion, and a lot of people have the mentality that they need to choke down as much house as they can possibly afford, regardless of what they're actually going to use.
As you'll see below – the cost of buying a bigger house doesn't stop with the higher purchase price and mortgage payment. There are A LOT of little “gotchas” a person signs up for when they live in a larger home, and understanding these issues can help us to thoroughly think through the consequences (for better or worse) of owning a home that comes with WAY more space than we need.
(Note: Just to be clear, I'm not saying it's bad to have a big house. To the contrary, I think big houses are actually pretty awesome – and they can be a fun place to put your money assuming you've got the financial means to do so).
Keep in Mind that these are very rough numbers and are more of a depiction of added cost in percent.
AVERAGE ONE-TIME COSTS WHEN BUYING A NEW HOUSE
- Purchase price of a average new house: $84/sq ft
- Closing costs: 3.5% of the home price
- Costs to fully furnish a new home: 20% of the home price
AVERAGE ANNUAL COSTS OF HOME OWNERSHIP
- Energy costs: $1.03/sq ft
- Maintenance: 1% of the home price
- Property taxes: 1.3% of the home price
Over a 30 year mortgage, each additional 500 square feet of space will cost you an extra…
- $42,000 in initial purchase costs
- $1,470 in closing costs
- $8,400 in furnishing
- $24,148 in mortgage interest
- $16,506 in property taxes
- $15, 450 in energy costs
- $12,600 in maintenance
HOW MUCH THAT BIGGER HOME WILL REALLY COST YOU OVER 30 YEARS ASSUMING YOU HAVE A 30-YEAR MORTGAGE AT 4%
- A 1000 sq ft house will cost you an extra $241,148
- A 1500 sq ft house will cost you an extra $361,722
- A 2000 sq ft house will cost you an extra $482,297
- A 2500 sq ft house will cost you an extra $602,871
So before you decide on that dream home that is going to be way more then needed just please take another look and determine not how much house you can afford but look more into how much house you are going to need
I would be happy to go through your needs and wants in a home through my buyer consultation