At Prime Custom Builders, we are driven by the joy that families get when we hand them the keys to their new home. But that joy can quickly disappear if you miscalculate your budget. When too much of your monthly income is spent on your mortgage, this is often referred to as being “house poor”. What exactly does it mean to be house poor and how can you avoid this pitfall? Let’s discuss that.
What Does It Mean to Be House Poor?
As we touched on, being house poor is when the majority of your monthly income goes to paying your mortgage. Then what little is left over is not enough to pay for other essentials. If you must regularly pick and choose which essentials to pay for or often have to forgo things that you enjoy, you may be house poor.
How Being House Poor Can Affect You
Being house poor can have many adverse effects on your life.
For one thing, not having a lot of wiggle room in your budget can cause you to stress over covering your other bills.
When you do not have any wiggle room in your budget, it prevents you from being able to save money. Having an emergency fund can do much to relieve stress when things break, or you incur unexpected expenses and bills. But without the budget to put money into an emergency fund, you may constantly fear unexpected costs.
Not having money for wants can also affect your mental health. We all need to do and spend money on things that are simply meant to be enjoyed and when you do not have the ability to do that, it can affect your happiness.
How to Avoid Being House Poor
One of the biggest reasons that people find themselves house poor is due to not considering other housing expenses along with their mortgage. All too often people will see the number that the bank has loaned them and aim to purchase as much home as possible with that loan amount. But the bank does not consider other housing costs into that number, so it is important that you do so to make sure that you can afford the house you are interested in. Some expenses you want to put into your budget can include:
● Utility bills
● Maintenance and repairs
● HOA fees
● Taxes and insurance
Sometimes job loss or hefty medical bills can lead you to becoming house poor. In instances like these, refinancing or downsizing altogether might be required. The bottom line is that your home should be a comfort, not a burden. By factoring in these costs and budgeting accordingly, you can avoid being house poor.
By Prime Custom Builders 9-20-2022