Deciding whether to buy a bigger home

Question

I recently made an offer on a home that's much more expensive than where we currently live. My housing costs will triple if we make the move and while I'm making great money now, I'm worried about all the what-ifs. I'm a self-employed freelancer with a steady client base but who knows what could happen if a recession hits. Or if I were to get hurt and not being able to work. If anyone else has gone through a similar decision, how did you decide what to do? I want a nicer home because we really just don't love the one we're in now but I don't love the idea of spending so much money.

MichelleS · Answer

Everyone's comfort level is different. I like to think of 'worst case scenario' then figure out how I'd handle it. If I can figure it out in my head and I'm comfortable with the outcome - then I'll go for it. If not - then it's not the right move for me.

Anonymous · Answer

I think this has a lot to do with how you've budgeted and saved historically. Do you have a solid nest egg that you feel will support you in case business slows down? Broadly speaking I think optimize the things that are important to you, identify the price point required to buy those things, and see what's available for that price. For example I was willing to pay more for location and square footage, but not for high end features. So I optimized around price per square foot in my neighborhood of choice and now am really happy with the decision!

Anonymous · Answer

If you love spending time at home and you're planning to stay at least five years, then sure, sounds like you're making a good choice. If, however, you're someone who travels often, or, likes to spend a ton of time outside of the home I don't think it's worth it.  But, that's my perspective as a former homeowner, now happy renter. If something does happen to your income, would you be comfortable taking on roommates or Airbnb guests to offset the cost? That's always something to think about too!

Lea Fichter · Answer

I almost bought an expensive home, but we backed out at the last minute because the inspection came back with a ton of issues. We wound up buying a home that was $100k less. 4 months after we moved in, I found out I was unexpectedly pregnant.  We are SO happy we bought the less expensive home because daycare in our area is about $17k per kid per year. If we had the more expensive mortgage, we would have been in big trouble.

Make sure your mortgage isn't going to cause you a financial hardship if your freelance work dries up for a bit, or something else happens.  You really never know!

Kori Reffner · Answer

I haven't gone through this personally but I have had friends/relatives who were in the oilfield do this. It all just depends on what is best for your family, personally I would prefer to be in a home that I am comfortable knowing my family is secure and that finances are the least of my worries. Less stress is best! I hope this may have helped you! Good luck with you decision!!

Ruzana Glaeser · Answer

Are you a dual income family? If so, what has worked for us to ensure that we would be able to sustain living situation if we went to single income. I am not sure how single parents can address this situation, but it has worked for us. It's tempting to get a bigger house or get other loans for home improvements, cars etc. But our check point is - can we afford it if either one of us got laid off? We have emergency savings but that's for the times when both of us are laid off or are sick.

LEANNE TOBIAS · Answer

What percentage of your income will be spent on housing if you make the move? If it is significantly above 30%, I would think twice, unless you have substantial savings.

In addition, it is prudent to have at least 6 months of expenses in savings or other investments as a financial cushion, in the event of job loss.

Finally, is there another wage earner in your household, or is it just you?

My own feeling is that it’s smart to have a good backup plan before dramatically increasing your expenses.

Anonymous · Answer

You mentioned purchasing land for a “hobby farm”, typically land used for farming is set at a different tax level than residential tax rates. Where we live (also rural) anything 5 acres and over can be considered ag instead of residential. 
With the farm you can further offset costs by selling any goods you grow (live stock, meat, eggs, food, flowers etc.) at a farmers market or road side stand.  A lot of things can be written off when u have a farm.
Above I believe you had stated that there was a second structure that could be rented out, this would be perfect to help offset how much you are spending on your mortgage or other increases of expenses (bigger house higher utilities, is there a barn that needs electricity, water increase for live stock or fields). I know becoming a landlord can be scary but if they are in a separate area on the property it could help to off set costs and also it may help if the renter is willing to help take care of land/livestock if that is all new to you.

Yes your finances can change but worst case scenario is you end up selling the home down the road but have taken the opportunity to live a dream and make memories for you and your child(ren). I’m sure it was scary to go freelance when you first started as well but it seems you are successful. Also you can get insurance that would cover all expenses if you became ill or injured yourself and couldn’t work so that is something else to take into consideration.

Kim Beasley · Answer

I decided early on to buy what I wanted (at minimum) with the goal of staying and paying it off. GOAL ACCOMPLISHED!! Just made my last house payment 2 months ago! To answer your question, your hesitation is a sure sign you aren't comfortable with the current choice in housing, so I would say, take a step back from it. Find something not as expensive that you two love and then go for it!! Good luck!

Anonymous · Answer

I understand your fear of spending money, and also counting on freelance income for such a large commitment of recurring payments. If your bank approves you then you must be doing something really right. For me, personally, I would worry about the freelance drying up, too. That doesnt mean don't do it, it just means I've seen things go bad for others and wouldn't want the same to happen to you. I hope this doesnt come off as negative, I'm just a bit of a realist. Good luck to you.

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