Having a house of your own is an amazing privilege, but it also comes with a number of responsibilities. As a homeowner, you’ll get to create equity, make improvements, and enjoy a number of tax breaks.
However, housing is not cheap and comes with other costs. The costs of owning a home are seemingly endless: there’s insurance, taxes, upkeep, renovations, and more. Some people make poor housing decisions, such as purchasing a home when they aren’t financially ready or spending too much on a property that they can’t really afford.
When this occurs, homeowners may feel trapped, and the only way out is to sell their house at a significant loss. Here are three warning signals that your home is contributing to your money woes.
Sign 1: When your monthly payment equals or exceeds 50% of your take-home salary.
With a monthly income of $4,000 and a mortgage payment of $2,000, it will be difficult to cover basic living expenses, let alone those of a family. It could work for a while, but eventually reality will set in.
Sign 2: You are unable to pay your utility and/or home maintenance payments.
A ruptured water heater, for example, may compel a homeowner who did not save for such contingencies to max out a credit card and plunge them deeper into debt. If you can afford to buy a property, you can afford to take care of it. You should also factor in the higher cost of utilities, what with having to care for a larger space, watering grass, and paying garbage and stormwater drainage fees in many areas.
Sign 3: You are unable to advance or attain your financial objectives.
Your ability to save for the future, save for your children’s education, pay off debt, or amass a substantial emergency fund will be severely hampered if the majority of your income is going toward housing costs. It’s likely that your mortgage payment is too high or that your spending habits are out of whack if you’re having trouble meeting these objectives and saving money each month.
If you recognize all three of these signals, it may be time to think about selling your property. You can no longer afford the house and will never be financially secure if you remain in it.
Only turn to your own house as a very last option. If the cost of the payment is reasonable in relation to your income and the cost of upkeep is manageable, you should pursue it over any other option. On the other hand, if you do everything and still have no luck, it’s probably time to sell the house and go on.