Jump to content

How to manage a mortgage without losing yourself in debt?


Mila
 Share

Recommended Posts

I am somewhat scared to buy a house. I know so many people who have lost their homes. I worry that I won't be able to manage the debt and I will get in over my head and mismanage my money. What is the best approach to managing a mortgage on a home and not being another debt statistic? 

  • Like 1
Link to comment
Share on other sites

I understand being scared. I think the best way to mange it is to not live beyond your means. I would stay under 30%. So your mortgage should not make up more than 30% of your total monthly earnings. You might feel like your options are more limited but you will be able to manage easier.

  • Like 2
Link to comment
Share on other sites

Just track all of your spending now. Write down your debts and bills. Just make sure that each month, you always have at least $500 to spare so no matter what comes your way, you will have extra income already and be ahead of the issue. When you don't need it, just put it into savings or a separate bank account you only use for emergencies. 

  • Like 3
Link to comment
Share on other sites

On 10/6/2021 at 8:14 PM, Emma said:

Just track all of your spending now. Write down your debts and bills. Just make sure that each month, you always have at least $500 to spare so no matter what comes your way, you will have extra income already and be ahead of the issue. When you don't need it, just put it into savings or a separate bank account you only use for emergencies. 

I agree with this. This is a good first step. Figure out your financial needs and make sure you are in a position to always have extra money left over. You do not want to live paycheck to paycheck while paying off a house. You end up getting pressured to sign up for more and more credit cards. 

  • Like 1
Link to comment
Share on other sites

Your housing expense will make up about 30% of your overall expenses. Try to keep it under this range whenever possible. 

I have been working hard teaching my kids how to save so when they are in their early 20s they will be able to have enough for that 20% down payment on a home so they can avoid useless expenses like PMI. 

I am also trying to teach them that the living expense does not have to be 30% it can be much less or even negative if you play your cards right. 

If your situation allows it my favorite pathway I like to preach would be to buy a quadplex first. Live in one unit and lease out the other 3. Learn how to start playing landlord. Those 3 tenants should come close to covering your mortgage. With the money you are saving from having a lower living expense then others continue to save for the next property. 

You can qualify for standard financing on dwellings 4 units or less as long as you are living in one of the units full time. 

If I did it all over again this is the way I would have started but much like everyone else I got to learn the hard way. 

  • Like 1
Link to comment
Share on other sites

  • 2 weeks later...

If you can manage to but a house and have it costing you less than 30% of your total, you will be fine. I think people are better off aiming for 25% or less. I know some banks will let you go up to as much as 47% of your income. NEVER, EVER, EVER DO THIS!

  • Like 1
Link to comment
Share on other sites

I guess the 30% rule is something I need to pay attention to! That makes a lot of sense. Would you say that people who struggle with mortgages and house debts ignored this more often than not? 

  • Like 1
Link to comment
Share on other sites

On 10/23/2021 at 4:07 PM, Mila said:

I guess the 30% rule is something I need to pay attention to! That makes a lot of sense. Would you say that people who struggle with mortgages and house debts ignored this more often than not? 

Yes the people that go over 30% in housing expense will struggle. They are over extended at that point and that brings up numerous stresses on the financial situation. Once you get that housing expense down to nothing (property taxes, insurance, utilities, and repairs are what is left) then you get to see how much life become stress free when that one expense is gone. It makes it so rock bottom does not look so bad which in turn will enable you to take on more risk which can lead to greater rewards. 

  • Like 1
Link to comment
Share on other sites

On 10/25/2021 at 4:04 PM, James said:

Yes the people that go over 30% in housing expense will struggle. They are over extended at that point and that brings up numerous stresses on the financial situation. Once you get that housing expense down to nothing (property taxes, insurance, utilities, and repairs are what is left) then you get to see how much life become stress free when that one expense is gone. It makes it so rock bottom does not look so bad which in turn will enable you to take on more risk which can lead to greater rewards. 

Funny you mentioned that. I was looking over some housing costs and a lot of people end up paying the same amount they pay in property tax, insurance, and utilities for just the mortgage! So if all of that is say $800 a month, they are paying $1600 a month which to me is a lot!

  • Like 1
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

 Share

×
×
  • Create New...