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Is Bigger Really Better? The Risks and Rewards of Buying the Biggest House You Can Afford

Living Insights

If you are a fan of real estate shows, you might think that bigger is always better. On those shows, young couples are routinely encouraged to buy bigger homes than they currently need. The idea behind that advice is that the home will grow with them, and that children will eventually occupy all those empty bedrooms.

While that may seem like sound reasoning, there is a risk to buying the biggest home you can afford. Large homes come with outsized costs, not just for the mortgage but for upkeep, real estate taxes and repairs as well. Before you shop at the top end of your price range, you need to think carefully. Bigger is not always better, and buying a smaller home can have a number of important benefits.

Market Appreciation – Is Bigger Better?

One of the most frequently cited reasons for buying a bigger house is that the property will appreciate more, but it that really true? There are a lot of factors that go into a home’s value, and square footage is just one of them.

All else being equal, a larger home will almost always sell for more than a smaller one, but the rate of appreciation on a McMansion is not necessarily higher than that of a more modestly sized home. A smaller home in a conveniently located suburb may sell more easily than a huge property located an hour away from a major employment hub. It is important to understand all the factors that go into home pricing before settling on a larger and more expensive house.

Assessing the Costs and Tradeoffs of a Huge Home

Buying a huge home may feel good, but it is important to weigh the pros and cons. A larger and more expensive home will obviously mean a bigger mortgage payment, but many buyers forget about the higher down payment.

If you shop at the top end of your price range, you may not be able to make a 20% down payment, and that could put you on the hook for expensive private mortgage insurance (PMI). It could be years before you build up enough equity to ditch the PMI, and that could force you to put your other financial goals on hold.

The cost of upkeep and maintenance will also be higher for a larger home. Everything from the time it takes to vacuum the floors to the cost of a new roof or set of windows will be impacted by your square footage, so think about the lifestyle you want to maintain and shop accordingly. Would you rather spend your time cleaning the kitchen or playing on the beach? A smaller home with lower maintenance needs may be a better choice, even if you can easily afford a much larger home.

The Dangers of Going Too Small

Buying too much home can be costly, but so can buying a home that is too small. There is something to be said for the theory that buyers will grow into the homes they purchase, and it is important to think about future needs as well as present ones.

If you choose to buy a more modest home than you can afford, it pays to choose one with some extra space. A spare bedroom will give the in-laws a place to stay when they visit for the holidays, and an extra bathroom will make getting ready for work a lot easier.

As your family grows, you will indeed grow into that larger space. At the same time, you will not be burdened with a huge mortgage and the higher cost of real estate taxes and home maintenance.

Striking the proper balance between your current housing needs and your future self is not always an easy thing to do. While real estate agents tout the benefits of larger homes, buyers need to look at their own situations before making a decision. Sometimes bigger is really better, but other times a larger home simply is not worth the extra cost.

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