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What to do if you’re house poor

Click here to ask Chuck your money question

To learn Biblical answers to your financial questions, you can #AskChuck @AskCrown your questions by clicking here. Questions used may be lightly edited for length or clarity.

Chuck Bentley
Chuck Bentley

Dear Chuck,

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I see that mortgage rates are dropping. Several years ago, my husband and I bought more house than we really need. Is this the time to sell so we can purchase something more affordable? Our current home eats up 40% of our budget preventing us from saving and giving at a level we desire.

House Poor

Dear House Poor,

In a sense, you truly are “house poor,” like many Americans, as a result of carrying too high of a mortgage for your current income. I commend your interest in cutting your housing expense. It is the biggest expense in the American budget. And, now may indeed be a great time to lower your costs!

If You Decide to Sell

Rates for a 30-year fixed rate mortgage have dropped to a 14-month low amidst the largest weekly decline since June 2009. March 28th, Freddie Mac reported that a 30-year fixed-rate-mortgage (FRM) averaged 4.06% compared to 4.40% at this time last year. A 15-year FRM averaged 3.57% down from 3.9% last year.

Danielle Hale, chief economist for reports: Putting a home on the market in early April positions sellers to attract buyers seeking to a close and move before the beginning of the school year. reveals that homes listed now will sell an average six days faster for several percentage points higher, granting sellers an average gain of $17,000. June is traditionally peak buying season, but where you live could be a determining factor, so do your research first.

High volume for peak selling means buyers have more homes to choose from, and sellers benefit from shorter marketing time with more buyers in the market.

If You Decide Not to Sell

If you want to stay put, refinancing may help your budget. Consider key factors and use our refinancing calculator before taking a leap. Also be sure you understand the difference between refinancing and recasting before you make a decision.

NerdWallet says buyers should compare mortgages at five lenders before applying for a loan. They calculated that this step could save $430 in interest the first year alone, based on a 30-year FRM on a $260,000 home. This will take some time but a mortgage comparison tool can help you see the differences in monthly payments and the long-term costs. It is well worth the time to compare rates to get your best deal.

Unless buyers are paying cash, they should get pre-approved to avoid missing a purchase in highly competitive markets. This reduces stress, grants higher acceptance of offers, provides credibility, and gives realtors the confidence needed to help find clients exactly what they want.  In addition, appraisals can be ordered and the entire processing goes faster.

Other Real Estate Considerations

Pros and cons of buying vs renting

The costs of homeownership

The benefits of a smaller home

Other timing issues

Last month, Market Watch released a report from RentCafe revealing that the number of renters over 60 has increased more than any other age group. The number grew by 43% over the past decade compared to an increase of 7% in renters under age 35.

If the trend continues, RentCafe economists predict seniors will be the second largest group of renters by 2035. A friend of mine explained that many seniors want a “lock and leave” situation that gives them freedom from maintenance and security issues as they travel and need more flexibility. The availability of their homes will be a blessing to those seeking to purchase homes in areas of housing shortages. 

Buy Less, Save More

Overextending causes stress and deprives homeowners from living as God designed. New research from TD Ameritrade shows that “super savers,” those who save 20% or more of their income, spend less on housing that the rest of the population. The statistics are astounding: super savers spend an average 14% on housing while others spend 23%.

They discovered that cutting one major expense in their budget eliminates the fatigue of reducing lots of smaller budget items. And, they know that the extra space marketed in newer homes is not necessary. The living space per person in homes built today are double what they were in the ‘70s. The danger with the extra space is the temptation to fill it with “stuff” you don’t need, can’t afford and won’t want in the future. Smaller homes save in more ways than just the mortgage payments!

Biblical Principles

Whether renting or buying, God’s Word is timeless and helpful at all times.

Keep an eternal perspective. This home is temporary.

In my Father's house are many rooms. If it were not so, would I have told you that I go to prepare a place for you?And if I go and prepare a place for you, I will come again and will take you to myself, that where I am you may be also. (John 14:2-3 ESV)

Pray for the proper timing. Don’t rush into such a major purchase.

Prepare your work outside; get everything ready for yourself in the field, and after that build your house. (Proverbs: 24:27 ESV)

Rely on the wisdom of God before you make a decision.

By wisdom a house is built, and by understanding it is established; by knowledge the rooms are filled with all precious and pleasant riches. (Proverbs 24:3-4 ESV)

Act upon God’s direction when buying or selling.

Everyone then who hears these words of mine and does them will be like a wise man who built his house on the rock. (Matthew 7:24 ESV)

My Advice

You can work to increase your income, or immediately relieve the pressure by downsizing. One or both of those is required. In your case, 40% is far more than you should be paying for your mortgage, so it is a good time to get right-sized. Try to have a mortgage of no more than 14 -25% of your monthly net income. This will allow you to save and give more, and sleep better at night.

Chuck Bentley is CEO of Crown Financial Ministries, the largest Christian financial ministry in the world, founded by the late Larry Burkett. He is the host of a daily radio broadcast, My MoneyLife, featured on more than 1,000 Christian Music and Talk stations in the U.S., and author of his most recent book, Money Problems, Marriage Solutions. Be sure to follow Crown on Facebook.

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