Nobody Calls it House Poor? That is an expression that you don’t hear much these days, and I wonder why it seems to have evaporated as a term when purchasing a house? I rarely hear Realtors using this expression to dissuade potential buyers from binding themselves up in too much long-term debt (if anything, the opposite is true). I guess the code phrase to other realtors would be for buying too much House now, might be “buying a house they can grow into.”
With the current rate of interest for mortgages, it seems like a great idea to take on as much House as you can, especially if you are young because you have so many things ahead of you:
- You will need more space because you are going to have kids
- You will make more money soon, because your career is only starting
Yes, a real estate agent told me that, in 1990 when we were looking at our first house, but I didn’t fall for it, and back then, our first mortgage rate was 12.9%, so we locked in for five years (that was a great deal back then!). We didn’t overbuy at the time because with interest rates so high, adding more to the principal meant a higher monthly payment.
These days you can get a mortgage at 2.95% (at best). Thus adding more principal wouldn’t change much. You might even be tempted to borrow more money to:
- Get some new appliances for your house
- Consolidate your credit card debt
- Add in your moving expenses, land transfer taxes and maybe a nice vacation
- Add in your Student Loans
At that rate of interest why not?
Allow me to be clear in my answer, “What are you NUTS ?!?“. We live with historically low-interest rates, which will eventually go up. What do you do when that happens? Assuming the rates can’t go up because the fragile economy will catch a bunch of folks off guard is my guess.
Anybody else ever heard the expression House Poor lately?