How Much Should You Pay For a New Home?
Editor’s Note: This new series on Financial Fitness comes from personal finance expert, and SoFi content partner, Dr. Tony Pennells, founder of MindShift.money, Using proven tools and systems, Dr. Tony demystifies “financial freedom” with common sense solutions to help people create true wealth (the type that makes money that you don’t have to work for!). Click here for earlier stories in the series.
How much should you pay for housing? This is a great question. We’re expected to own a home. If you haven’t been told this directly, you’ve probably felt the pressure over the years, because the idea that a home is a good financial investment is ingrained in our culture. And that’s fine. Owning a home can be a good thing. But not always.
People buy the best home they can afford. That used to mean the best home for the money you had saved and allocated. Today “the best home you can afford” means the home you can buy with the maximum loan the bank will give you.
But of course, the choices you make today affect your financial freedom for tomorrow.
When you approach home ownership focusing on the size and amenities of the property rather than what you should realistically pay each month, you will most certainly experience a setback to your financial freedom. The average person that comes to MindShift.money is paying 40 – 50% of their take-home pay to interest payments—mostly around their mortgage. So a purchase that was intended to be a positive financial decision quickly becomes just one more roadblock on your path to financial wellness.
How do you know if you’re spending too much on your mortgage? Or if owning a home is getting in the way of your financial fitness? Watch the video below and find out.
Editor’s Note: This article originally appeared on our web partner’s site, MindShift.money
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