The Big House Dream vs. Financial Reality: Is More House Worth the Cost?

There is something tempting about a big house.

More square footage. More bedrooms. A larger kitchen. A finished basement. A bigger yard. Maybe a pool, a walkout, or enough space that everyone in the family can spread out.

It is easy to walk through a beautiful home and imagine how much better life might be with all that extra space. Mrs. CBB and I have done it ourselves. We have toured larger homes and talked about what it would be like to move up.

But the price on the listing is only the beginning.

A bigger house can also mean a bigger mortgage, higher property taxes, larger utility bills, more maintenance and repairs, more furniture, more yard work and more money tied up in one place. If you stretch too far, the house that was supposed to improve your life can start controlling your budget.

That is when the big-house dream can start putting real pressure on the household budget.

Why Is A Bigger House So Tempting?

For many people, a larger home feels like progress. You work hard, your income rises and naturally you start wondering whether it is time to upgrade.

There is nothing wrong with wanting more space. A growing family may genuinely need another bedroom. Working from home might make an office valuable. Some people want room for aging parents, hobbies, entertaining or simply a larger yard.

The problem starts when we confuse what the bank says we can borrow with what we can comfortably afford to live with.

A lender looks at whether you qualify for a mortgage. Your household budget has to answer a different question: after paying for the house, will there still be enough money left for the rest of your life?

When More House Starts Squeezing The Budget

A larger home can squeeze the budget even when every bill is still being paid on time. If you want the deeper explanation, read my house-poor article, where I explain the warning signs and why buying below your maximum can matter.

You might own a beautiful home but have very little breathing room for:

• Emergency savings
• Retirement contributions
• Debt repayment
• Groceries and transportation
• Children’s activities
• Travel or entertainment
• Home repairs
• Unexpected expenses

That is why I have always believed that qualifying for a mortgage and comfortably affording a mortgage are two different things.

The Mortgage Is Only One Cost Of A Bigger House

When people compare houses, it is easy to focus on the mortgage payment. A larger home affects far more than that one line in the budget.

Depending on the property, moving up can mean paying more for:

• Property taxes
• Home insurance
• Natural gas, electricity and water
• Roofing, windows and other major repairs
• General maintenance
• Lawn care and landscaping
• Snow removal
• Furniture and window coverings
• Renovations and decorating
• Cleaning supplies or cleaning services

The Government of Canada tells homebuyers to consider costs beyond the mortgage, including property taxes, heating, insurance, repairs and maintenance. The Financial Consumer Agency of Canada also notes that buyers should leave room in the budget for closing, moving and ongoing maintenance costs rather than stretching to the maximum mortgage available.

You can review the Government of Canada’s home-buying guidance or use CMHC’s mortgage affordability calculator before deciding how much house makes sense for your household.

Mortgage Qualification Is Not A Spending Goal

Current federal guidance says monthly housing costs should generally stay around 39% or less of gross household income, while total debt payments should generally stay around 44% or less. Those figures are commonly used when assessing mortgage affordability.

But I would never look at a lending limit as a target.

Your own comfort level may be much lower once you include groceries, transportation, childcare, savings goals and everything else your family spends money on. Just because a lender is prepared to give you a certain amount does not mean you need to spend it.

If buying the bigger house leaves you nervous every time the furnace makes a strange noise, the numbers may already be too tight.

A Bigger, More Expensive House Can Have A Smaller Buyer Pool

The original version of this article focused heavily on expensive homes that were difficult to sell. That point still matters, even without talking about celebrity mansions.

The more expensive or unusual a property is for its local market, the fewer buyers may be able or willing to purchase it.

That does not mean a large home is a bad investment or that it will not sell. Location, condition, demand, interest rates and the local housing market all matter. But if you ever need to sell quickly because of a job change, divorce, illness, retirement or another major life event, having a smaller potential buyer pool can matter.

A home is not as liquid as money sitting in a savings account. You cannot always choose the exact day you sell it or guarantee the price you want.

Be Careful Buying The Next House Before Selling The First

Years ago, I wrote about homeowners near us who purchased another expensive home before their existing house had sold. Their first home took longer to sell than expected, which meant carrying two properties at the same time.

That can work if you have enough savings and income to comfortably handle both homes. If you do not, carrying two mortgages, two sets of utilities, insurance and property taxes can become stressful very quickly.

Before buying first and selling second, I would want to know exactly how long our household could afford both properties if the first home did not sell as quickly as planned.

Why Mrs. CBB And I Bought Our Home On One Income

This is where our own choices come into the story.

Mrs. CBB and I bought our home based on one income because we did not want to become house poor or put ourselves in a position where losing one income would immediately create a financial crisis.

Could we have bought more house? Probably.

Would it have looked impressive on paper? Maybe.

But we preferred having room in our budget.

Over the years we have talked about moving into a bigger home. We have imagined having more space, a larger property, a pool and some of the extras that come with moving up.

Every time, though, we come back to the same question: what would we be giving up to get it?

A larger house would not only mean paying the difference in purchase price. It could mean taking on another mortgage after working hard to become mortgage-free, plus all the extra carrying costs that come with a larger property.

We learned first-hand how much freedom comes from eliminating a mortgage. I wrote more about our experience in How We Became Mortgage-Free In Five Years.

Financial freedom opened doors for us that extra square footage never could.

Ask Yourself What The Bigger House Will Cost Your Life

Before upgrading, I would sit down with the household budget and run the numbers using the new house, not the current one.

Ask yourself:

• What will the new mortgage payment be?
• How much will property taxes increase?
• What should we budget for utilities in a larger home?
• Will insurance cost more?
• How much should we keep available for repairs and maintenance?
• Will we still be able to save for retirement?
• Will our emergency fund remain intact?
• Could we carry the home temporarily on one income?
• Would we still have money to enjoy our lives?
• Are we buying more space because we need it or because we feel we should have it?

That last question can be uncomfortable, but it is worth asking.

When Buying A Bigger House Can Make Sense

I am not against big houses.

If your family needs the space, you have run the numbers, your other financial goals remain on track and the payments do not keep you awake at night, buying a larger home may make perfect sense.

The goal is not to buy the smallest house possible. The goal is to buy a home that works with your finances instead of against them.

There is a big difference between choosing a larger home because it fits your life and stretching for one because you want to look successful.

More House Or More Financial Freedom?

Homes are emotional purchases. That is part of what makes them dangerous to a budget.

You can fall in love with a kitchen, a backyard or a finished basement long before you have calculated what owning the entire property will cost.

There is nothing wrong with dreaming about the big house. We have done it too.

But I would rather own a home that allows us to save, handle emergencies and sleep comfortably at night than own a much larger house that consumes every available dollar.

Sometimes the best house is not the biggest one you can qualify for.

It is the one that gives you enough space to live and enough money left over to have a life outside of it.

Discussion: Have you ever been tempted to buy more house than you really needed? Would you choose the bigger home or more financial breathing room?