Buying a smaller home can help save you money. Find out how.
Two and a half years ago my husband and I bought our first home. Finding the right home is a process, and it can be tempting to choose a home that is either too expensive or too large for your needs. However, buying a smaller home can offer financial savings. Plus, this choice can help you prioritize other financial goals more easily. Here are four ways buying a smaller home has helped me save money.
1. Reduce utility bills
You will likely have lower utility costs when you own a smaller home because it will likely require less utility use than a much larger home. Due to the small footprint of our home, utility costs are similar to what we paid as tenants. Having lower monthly utility bills helps reduce our monthly expenses and provides flexibility to allow us to budget more of our money for other needs.
2. Less likely to make unnecessary purchases
When you own a smaller house, that means there is less space to store additional items and you have to be more strategic about where everything will go. I don’t know about you, but I’m not a fan of the move. The more things you own, the harder it is to move them and the longer the process takes. Owning less makes the move less stressful.
I have found that living in a smaller house helps minimize unnecessary expenses. I know we have less storage space and don’t want to live in a cluttered house. For this reason, we are more selective about what we buy. Since we spend less money on unnecessary purchases, we can contribute more to our savings goals.
3. Reduced repair and maintenance costs
Unlike tenants, landlords are responsible for repair and maintenance needs. These expenses can be significant and it is essential to prepare for them so as not to find yourself in a difficult financial situation.
We have already had to spend money on repairs and maintenance needs for our house. A good thing about owning a smaller home is that some repair costs can be lower than a much larger home. If you have to pay for a new roof, for example, a smaller house will likely have a smaller area to replace.
If you don’t have extra funds set aside in a savings account, figuring out how you’ll cover the cost of the repairs can be stressful. To avoid financial surprises, we regularly set aside money for future maintenance and repair expenses.
4. Able to pay extra for my mortgage (and pay less interest)
Since we bought a smaller, more affordable home, we don’t feel stressed out when making our mortgage payments. We also feel more comfortable spending some of our money on additional mortgage payments. We want to pay off our mortgage faster and pay less interest, so we pay extra on the mortgage principal every month. By doing this we save money.
If we had bought a bigger or more expensive house it might have been much more difficult for us to do as more of our income would go towards making the regular mortgage payment. We may not have had the extra funds to pay off our mortgage faster.
A smaller house may not work for everyone, but it has worked for us. Choosing to buy a smaller home can offer some financial benefits, and it can provide more flexibility in prioritizing other financial goals. But no matter which home you choose to buy, be sure to factor in all of the expenses associated with home ownership.
Homeownership is a lot of work and a commitment, but it can be rewarding. If you are planning to start the buying process soon, here is a list of the best mortgage lenders. You can also look at current mortgage rates to make a more informed decision.