Treat Your Mortgage Like Any Other Debt

Treat Your Mortgage Like Any Other Debt

Most financially savvy people are wary of getting in over their heads when it comes to credit card debt. But home buying? We don't always see home prices with the same caution.

Photo by tripleaxis.

The Motley Fool reminds us that a mortgage is like any other debt. Actually, I'd argue that it's more critical than other debts, since you can lose your home and seriously wreck your credit if you can't pay the mortgage. Anyway, before you consider buying a house as big as you can afford, keep in mind the debt you're taking on:

If you were approved for a credit card with a $US20,000 ($25,610) limit, does that mean you should run out and spend $US20,000 ($25,610)? Of course not. Just because you have the ability to buy something doesn't make it a good idea.

Unfortunately, too many people don't apply the same logic to buying a house, instead preferring to buy as much house as possible. If you need a big house, or if there is a legitimate reason to buy a house at the top of your budget, go for it. My point, however, is to get you thinking about the big picture, how much that big house is really going to cost, and whether or not you should lower your housing budget to put some of your income to better use elsewhere.

Owning a home comes with many expenses you might not expect, so you'll want to leave room in your budget for both the mortgage and those expenses. Check out the article below for more things you should consider when shopping for a home.

How Much House Can You Really Afford? [The Motley Fool]


    Good, simple advice. I remember when I bought, I was able to borrow around 40% more than I wanted to. I thanked the lender, but set a comfortable limit, and in the end didnt even need that.

    As rates were going up at the time (another consideration), I planned with that in mind, and it was still a little tight for the first 6 months, though never uncomfortably. Got past it, and 9 years later am comfortably on my way to owning in about another 5 years.

    Just remember that if you're going to miss payments or get in trouble, its usually in the first two years. After that you generally have a pattern, have gotten a payrise or two, and things are normal. So the general advice of planning for those extras is good - its those that catch you out early.

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