The saying bigger isn’t always better hold true, especially for real estate. While it can make sense to buy a home at the top of your housing budget you’ll grow in to, there’s such a thing as buying too much house. Buying your dream home the first time makes sense if you can afford, as you’ll save on closing costs; however, buying a bigger home you’re not sure you’ll grow into may not be the best idea. Here are six reasons why a bigger home isn’t always better.
1. Lower Mortgage Payment
When you buy a smaller home your mortgage payment will be lower. This can help avoid being “house poor,” when your mortgage payment is so high you have barely any money left over for other household expenses and for entertainment. Not only will you pay less interest over the life of your mortgage, you’ll have extra money to put towards long-term goals like your RRSP or your child’s RESP.
Don’t put all your eggs in one basket – it’s the most common saying when it comes to investing. This motto holds especially true for real estate. With home prices reaching the stratosphere in cities like Calgary, Toronto, and Vancouver, many homeowners have much of their net worth tied up in real estate. If you purchase a more expensive home and make only the minimum five per cent down payment, and house prices falls by 10 per cent, your mortgage will be underwater. If you had only invested some of your money in ETFs, mutual funds or blue-chip stocks, you would have been better protected.
3. Less Cleaning
A bigger house means more cleaning. If you’re already struggling to find time to clean your one-bedroom condo, what are the chances you’ll be able to keep up with the chores for a four-bedroom house? You could always hire a cleaning service, but if you’re buying a house at the top of your budget, you probably won’t have any money left over.
4. Lower Heating and Cooling Costs
A smaller home means your heating and cooling expenses will be lower. The difference between a two-story house and a bungalow can be hundreds of dollars a year. Instead of heating rooms you’re not using, you can use the extra money to pay down your mortgage sooner.
5. Lower Condo Fees
Besides amenities, the amount of condo fees you’ll pay is based on the square footage of your unit. The difference in condos fees between a one-bedroom and two-bedroom condo can save you hundreds. If you’re buying a larger condo for guests, is it really worth spending thousands extra in costs fees for a guest bedroom? It’s probably cheaper to rent a condo whenever guests come into town.
6. Fewer Rooms to Furnish and Decorate
If you’re only one person and you’re buying a three-bedroom house, you could find yourself struggling to furnish and decorate all the rooms. You could always get roommates, but do you really want to deal with the headache? Do you feel comfortable with strangers in your personal space?
While a bigger house sometimes make sense, it’s important to consider these reasons before purchasing. Speak with one of our mortgage experts to see how much you should be spending on a home to avoid this unpleasant situation.