Yup. I said snuggle. Let’s talk about it.
Often when you make the jump from renting to owning, your monthly expenses go up. For example:
- If you are currently renting a studio apartment and paying for a parking spot, your total monthly rent might be $2,050
- If you bought a house and borrowed $500,000 at 4.25% interest, your monthly mortgage payment would be about $2,460. Add in property taxes and home owners insurance, and your monthly payment is about $2,860.
That’s an increase in $810 per month just for a roof over your head!
A great way to really see if you can comfortably afford your new mortgage payment is to “snuggle” with it and live as if that were your cost of living right now. Take the amount of rent you currently pay and subtract it from your potential mortgage payment (in the above scenario, that would be $2,860 – $2,050). This is the difference in potential living expenses and current living expenses (our example leaves us with a $810 difference).
Take that money (our $810) and put it into a different account. This provides TWO benefits. First, it gives you a real life experience of what impact it has on you to be spending the full amount each month. Secondly, it helps you build your down-payment amount. It’s a win-win!
If after a few months of doing this, you feel comfortable and confident that you can live with your new potential mortgage payment, you will be ready to get out there and find your perfect place!