When it comes to buying residential property, most people want a house that makes the most of their mortgage. In many people’s minds, that means as large of a house as their bank will lend them money for. While bigger houses certainly have their appeal, they often come with additional expenditures that buyers tend to forget to factor in.
This post was written by our partners at Kukun, a platform that helps homeowners navigate the remodeling process, provide the inspiration, information, and tools you need to create a personalized home and finish projects on time, within budget.
The infographic below shows some of the hidden costs of buying a bigger house. The ideas in this infographic support the highly-vaunted system of incremental development, where you not only buy a house you can maintain but one you can add value to over time to build a stronger balance sheet. If you're also interested in learning how to save costs, we dive deeper into this in our guide of how to greenify your home with low energy costs.
Infographic Credit: InvestmentZen
Among the many benefits of choosing the right sized house, it can help save a significant amount of money in both the short and long-term. This can add plenty of value to your life in other ways, giving you more financial freedom to focus more on improving the interior of your smaller home as well as enjoy your family, community, and lifestyle – not to mention propel you towards early retirement. In addition to this, you'd also need to analyze how much is too much to pay for a property which we go over as well.
The figures used for the infographic represent the country’s average, but it provides a good demonstration of the hidden costs that come with opting for extra space no matter where you live. For example, the average cost of a house per square foot is $84, which would bring the cost of every extra 500 sq ft of the house to $42,000.
Unfortunately, this does not cover even close to the total cost. You still have add-ons such as closing costs (3.5% of the home price), furnishing (up to 20% of the home price), energy ($1.03/sq ft, though installing solar panels would make it cheaper), maintenance (approximately 1% of the home price per year) and property taxes (1.31% of the home price).
Add that all together, and assuming a 30-year mortgage, you could spend $120,574 for a 500 sq ft house. The price increase follows for every additional 500 sq ft you purchase. If your heart is set on a 2500 sq ft house, prepare to spend roughly $21,000 a year on your home.
While buying that bigger house can be tempting, it pays (literally) to consider whether the benefits of that extra living space is actually worth the cost.
About the author:
Kukun is the Expedia of home remodeling. Kukun offers the toolkit that provides renovation cost estimates, returns on renovation investments, professionals with work history and renovation management. Apart from the toolkit, Kukun is also empowering businesses and the remodeling industry with enterprise software and data. Visit Kukun at www.mykukun.com