That one decision will have the most influence on our financial goals than anything else we will ever do.
Back in 2001, at a time when McMansions were starting to populate the landscape with their 2500+ square footage and three car garages, we bought a 3 bedroom, 1850 square foot home with one full bath and a one car garage. As we were moving into this home, a family member asked us how long we were planning to stay in it. “This is a good starter home”, he said. We had not even slept in the house yet and someone was concerned about when we were leaving.
At the time, I was working full time while my husband was building his new business. We were approved for a loan, but after looking at many homes and running countless numbers we chose a home that was 20% lower than what we were approved for.
Over the years, we have refinanced our home several times from the original rate of 7.25% and reduced the terms from 30 years to 15 years. For us, refinancing was not to try to reduce the size of our monthly payment but to save ourselves thousands of dollars over the course of the loan. Buying a home below what we could afford will allow us to pay the loan off faster and then give us the flexibility to work towards other financial goals, like financial freedom.
Back in 2001, we knew that we would eventually start a family and our hope was that I would be able to stay home with the baby. If we bought a bigger home at that time with a much higher mortgage that dream might not have become a reality. Our mortgage payments are well within what we can afford on a monthly basis and as I stated above we are able to work towards paying off the mortgage early. And the primary reason is because we bought a home below our means.
Now that we are a family of four, we have made a firm decision that we will stay in the house…pray for me when I have 2 teenage girls and only one full bath. I’m sure we’ll get through it.
We have made plenty of financial mistakes, and in 2001, we didn’t realize that buying a home below our means would become our wisest financial decision.
What has been your wisest money decision? Let us know in the comments.
- Frugal Friday at Life as MOM