Home Regret – Avoiding a Massive Financial Mistake

There have been several articles recently on the subject of home regret. A sizable portion of millennial buyers are expressing regret when it comes to their house purchase. Unfortunately, home regret impacts people of all generations. If a house is a burden and the costs outweigh the benefits, it can be a boat anchor to your budget.

I believe hidden costs are the biggest impact to a home buyer. The mortgage payment is only the beginning! Buying a house brings a lot of responsibility and adds financial risk to your life. Sure, no one likes to throw money away on renting, but you can throw more money away buying the wrong house. Since we all need a place to live, it is a massive decision that can have an impact for many years.

Home Regret – Don’t Jeopardize Your Future for a House

All too often, individuals find themselves unable to invest in other assets because they have so much tied up monthly in making their house payments. It has become a hindrance in their efforts to get ahead. Buyers have bought large homes at the expense of having adequate cash on hand for an emergency, making retirement contributions, saving for college, and building a well-diversified portfolio.

Remember, just because the mortgage company approves you for a large mortgage does not mean you can actually afford the payment. If you truly can afford it and you feel the house will be a positive in your life, then by all means go for it! I believe you should enjoy the place you live. But do not follow the herd that believe buying the biggest house you can get is the best investment. Trying to accomplish wealth by dumping as much possible into a primary residence is a very risky financial decision. This is a sure-fire way to have home regret!

I feel bad for people entering the housing market right now. The truth is, both buying and renting are extremely expensive. It’s really a case of pick your poison. I empathize with young people trying to make such a huge financial decision. Many of the millennial families I work with vividly remember the event s of 2007-2009 when they saw the older adults in their life struggle financially. They are being cautious with their money and trying to make the right decision.

Home Regret – Our First Home Purchase

I can give you a personal example as to why you should be patient and make sure you are buying a home that truly fits your budget and lifestyle. My wife and I decided early in our marriage to buy a house. After a year of renting, we started looking around and trying to save up money for a down payment. We were still getting out of credit card debt, so my parents were kind enough to let us stay with them for a few months once our lease was up.

The market was pretty hot at that time. We did not see a lot of stuff on the market that we even liked. I was working a job that was a very long commute. We thought that perhaps we should move closer to where my office was. We did not have any friends in that area and it was a good distance away from where our family lived. However, we put in some offers on homes over in that area anyway.

Thankfully, none of the offers were accepted because after a few weeks I realized that I hated the job and was not planning on staying with the company long term. Also, the homes we had put offers in were over our allotted budget. They would have been a burden. So, we would have a place near a job I was planning to leave and a price that we really could not afford. The neighborhood was nice but not near where we were planning to be. It was a home regret crisis waiting to happen for a young couple.

home regret

Home Regret and Settling for the Wrong Choice

Even though we were able to avoid that situation, the process was draining and we ultimately ended up settling. We found a decent house in an older neighborhood. It was not really our style and was way too big for us. But, we could afford the mortgage payment so we ended up buying it. The house ended up being a burden in several ways. We did not have a lot of cash at the time, but we blew a lot of money on updates and repairs that were necessary.

The first winter there, the roof leaks were coming non-stop. The house was over 1900 square feet and was way too big for us. Therefore, it cost a fortune to heat in the winter and cool in the summer. The utility bills alone were another huge expense. We had to run space heaters and fans in several areas to try to get the place comfortable.

The next summer, the basement started leaking and we realized the downspouts were all damaged. Water was just pouring into the corner of the foundation. There were plumbing problems and issues with the natural gas lines. With all the leaks, we finally put a new roof on the house.

home regret

Home Regret – The Money Pit

Have you ever seen the movie the Money Pit? I think we could have starred in the sequel. We joke with my dad that he hated the house more than we did, since I had to call him several weekends a month to see if he could help me fix things. My Dad is extremely handy and knowledgeable with construction related items, but I was beyond clueless and took no interest in any of it growing up. Once the repair bills started piling up, I started paying more attention!

Since we did not have a ton of money, I could not keep calling professionals to come out and constantly do the repairs. Thankfully, I had a good friend who was a roofer and him and a bunch of buddies ended up doing it for a fraction of the cost.

Life is all about lessons and trying not to repeat mistakes. We went on to purchase another home after that experience and we lived there for over ten years. We decided at that time to get a new condo since we figured a new place would require less work. Because we had an association, we were glad to have the water, lawn care, and outside maintenance covered.

Let’s Try This Again

Even though we came in with more money down and chose a residence that was a much smarter fit for our budget and lifestyle, there were still a lot of expenses and unexpected things that cost us a significant amount of money. We bought at the top of the market in 2006, so when the housing crisis hit in 2008 the value of the property plummeted. It took several years before properties even began to start selling within our development. When someone did sell a unit, it was for a fraction of what they paid for it.

By the time we sold, we were able to get about 80% of what we had paid ten years previously, but we were ready to move on. We enjoyed our time there, it was a nice place to live and served us well, but it was in no way, shape, or form a good investment! It served a very important purpose in providing us a nice roof over our head. But in the long run, the place cost us a fortune.

Our experience really helped us get clarity on what we wanted out of life. We continue to seek ways to downsize and not have a lot of money tied up in our house. At this point, we are more interested in experiences and having some freedom to do other things with our time and money. My wish for you is to achieve the level of freedom you want with your finances.

Avoid McMansion Fever

A lot of people grew up with the mentality of buying a starter home, then going up in house as the income went up with it. If you need a larger home as your circumstances change, that is your decision. I simply urge caution and ask you to consider all factors.

That line of thinking has cost some people untold wealth due to continuing to pour their hard earned cash and equity into a bigger mortgage, more debt, and missing out on opportunities to grow that money with smart investing. More and more couples with small families who qualify for the mortgage are going right for the big McMansion with the huge payment in the fancy neighborhood. Those are often beautiful homes, but they can come with a very steep price.

Getting Off On the Right Foot

I have seen that decision become a massive burden on a young couple starting out. Buy as much house as you need to live comfortably and resist the urge for a big house. Allow plenty of time to get your financial foundation in order. I had several colleagues who are my parents’ age who remember growing up in a 1000 square foot house. That includes their parents and siblings! Many people are amazed at the size of houses that some people are buying. It is definitely a sign that times have changed.

If you are a single person or have only you and your significant other, do not do what we did and buy a 1900 square foot house unless your circumstances require it. You may just pour money out the window on maintenance, energy, and taxes. Give it some careful thought. You will probably feel compelled to make sure every room is furnished and looks nice. You might need more stuff to fill rooms you rarely enter. Do not get house fever. Think of it as a business transaction for you and your loved ones.

Home Regret and the American Dream

Remember, buying a house can be part of a great financial plan. However, you do not have to buy one if you do not want to. You can still reach your goals and enjoy life every bit as much renting. Ignore the armchair economists who tell you that it is foolish if you do not buy one. Some of the most well-meaning people I know are also the most broke and in debt. I am not trying to be mean, but just highlighting the power of peer pressure.

The American Dream can be a nightmare very quickly. The wrong home purchase can become a massive burden that will cost you untold amounts of money to get rid of. It is rarely a big mistake to rent a little longer than you would like. That might lead to greater opportunities when it comes to making a sound purchase. Avoiding home regret should be a part of your decision.

If you make good decisions regarding your living arrangements and weigh all of the personal factors involved, you may find it just is not the right thing at that time.

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