Are you regretting your decision to purchase a home?
There’s a reason home buyers are warned not to get in over their heads and take on mortgages they can’t easily afford. Over time, the cost of owning and maintaining a home can rise. The last thing you want is to end up house poor.
There’s no official definition of the term “house poor.” Generally, it refers to spending so much of your income on housing expenses that there’s little left over for anything else.
Some people might feel house poor because their housing costs occupy 40% of their income. Others might feel that way because their housing costs eat up 60% of their earnings.
Either way, the bulk of today’s homeowners consider themselves house poor — and that’s at a time when property owners are sitting on more home equity than ever before. In fact, 69% of homeowners feel they’re house poor, as per a ConsumerAffairs report. And 73% have reported that meeting household expenses is becoming increasingly difficult.
If you’re having a hard time keeping up with your housing expenses, there are steps you can take to ease that burden. The sooner you do, the better you might feel about your financial picture on a whole.
Getting ahead of housing expenses
As a general rule, it’s a good idea to keep your housing costs to 30% of your income or less. By “housing costs,” we’re talking about not just your mortgage, but also, your predictable costs, like property taxes and homeowners insurance.
If you’re feeling house poor, there’s a good chance it’s because you’re spending more than 30% of your income on housing. But also, you may not have started off doing so. It could be that your income went down, or that your housing expenses rose — say, you faced a steep property tax hike recently. Either way, there are steps you can take to lower your housing costs.
First, you can look at refinancing your mortgage. If you have a great credit score, you might qualify for a much lower rate on your home loan than what you’re paying today. Going through with a refinance could result in lower monthly mortgage payments.
If you need help covering other expenses like property taxes, insurance, and maintenance, you can look at doing a cash-out refinance if you’re sitting on a lot of home equity. A cash-out refinance lets you borrow more than your existing mortgage balance and use the rest for any purpose. If you …….