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Mortgages, Paying Cash and Goal-Setting Run Amuck

I finished sharing our story of paying cash for a house two weeks ago and but I promised I’d follow it up with a few thoughts on mortgages and paying cash. Unfortunately, I completely forgot about writing this post last Wednesday, so I’m finally getting it done this week. Thanks for your patience!

While being debt-free is a wonderful thing, I want to stress very clearly that it’s not the be all, end all. Paying cash for a house doesn’t make you a better person than someone who is barely struggling to make ends meet and doing good to pay the utility bill and grocery bill.

We all have different families, different backgrounds and different situations, so our financial stories are all going to look quite different. And that’s perfectly okay! I want to give you ideas, inspiration and encouragement here, but then I hope you’ll take it and go find how to best steward the resources God has given to you.

With that said, if you are considering the benefits of paying cash for a house versus getting a mortgage, here’s what I’d encourage you to think about:

1) What are the costs of housing in your area?

Don’t just believe what everyone says about how much houses cost where you live. Go research it out yourself. All real estate is local. The prices in one area will be different from another, even if in the same city with comparable cost of living. For example, if you live in an area where most houses cost $400,000, you very well may be able to find a fixer-upper for $200,000 in a decent part of the other side of town.

Since we live in the Midwest, housing prices are really affordable, compared to many parts of the country. In fact, with some looking and patience, you can buy a very decent relatively new starter home for around $100,000 to $110,000. (Some of you who live in high cost of living areas just had to pick yourself up off the floor, I know!) The low housing prices is one reason we moved here and one of the big factors in our decision to save to pay cash for a house.

2) How much can you save each month?

This is not meant as an exercise in frustration, but as a reality check. Look at your written budget and see if there are any areas you’d be willing to cut or downsize for a time period in order to free up more money to go to savings.

Our family decided to keep our grocery budget low, have a moratorium on spending, not have any monthly subscriptions, delay college and retirement savings and downsize in rental home in order to free up more money to put toward savings. We also were blessed with a good income from both of our businesses, so the fact that we kept our expenses as minimal as possible and didn’t have any debt allowed us to be able to save a sizable amount of our income each month towards a house.

3) What do the numbers look like in ten years?

Once you have a good understanding of how much you can expect to pay for a house and how much you can save each month, you’re ready to run numbers and calculations to determine what is the best plan of action for your family. Figure out how much you could potentially save over the course of the next ten years if you were to live on as little as you can, rent and save as much as you can.

Then, calculate how much you’d have in equity in a home in ten years if you were to instead save aggressively for a great down payment (at least 20% down, maybe even 40%+) on a 15-year fixed rate mortgage on a very modest home, buy the home and then throw everything you could at the mortgage payment to pay it off early.

Running these numbers can give you a very helpful gauge to decide what is the best course of action for your family.

Don’t Get Too Focused and Miss Out On Life

My husband and I are very focused, driven and stubborn people (well, it’s probably just mostly me who is stubborn!). These can be wonderful qualities when exercised in balance.

Unfortunately, we didn’t exercise a lot of balance while saving for a house. Since we’re both self-employed and our income is based a great deal on our productivity, we became work-a-holics with a single-minded focus of earning enough to make our monthly house savings goals.

Instead of pacing ourselves and allowing ourselves margin, . We accomplished our goal, but not without it taking a major toll on our family, friendships and health.

I’m grateful that God was gracious, our friends and family were forgiving and we survived the grueling months of hard work. But neither my husband nor I would recommend that you follow in our footsteps.

Just in the last year, we’re finally feeling like we’re beginning to learn to know our limits, have our priorities in better order and have more margin in our life — and we are happier and healthier for it.

So please, go right ahead and set big goals and work hard, but pace yourself and give yourself grace and breathing room.

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  • says:

    Not all large cities are expensive. We bought our 2-bedroom home (1000 sq ft) in San Antonio, TX for $86K. Not a “nice” part of town but not bad either (just older). In the “bad” parts of town (westside, eastside, some southside) you can get a house twice as big for just under $100K. And San Antonio is one of half a dozen towns in the country where the economy is still going up! 🙂

  • Jen says:

    We will be closing on a home in another week. We are purchasing a foreclosure for $190k. It was appraised at $287k. Our mortgage is $200 less a month on this 4 bed 2.5 bath home than for a 2 bed 2 bath apartment we were looking into.

  • Shanda says:

    It’s so amazing to see the differences in housing prices around the nation. I live in a really small community in Michigan. Our town consists of MAYBE 1000 people. We paid $100K two years ago for a 2500 sq. ft. log cabin on 5 acres. You can easily pick up a fixer upper foreclosure around here for less than $20K. The down side, however, is the job market. My husband and I both have jobs, so it works for us and I’m quite grateful. On the flip side, I would never recommend anyone moving to Michigan without a job waiting for them. A cheap house is only worth it, if you a job to pay for it.

    Enjoyed reading your post and the comments here!

  • Cat says:

    Love your words of encouragement for all!! In todays world its so easy for us to look at others and not realize where they have been and the struggles they have had. Your blog is so honest and uplifting. God Bless.

  • Lea Stormhammer says:

    Okay, these are just cracking me up!

    My cousin is looking at buying a house in a different part of our state and she’s complaining about how high the cost is – 2,500 sq ft, 5 br/3ba, 5 acres for the same price as our 900 sq ft, 3 br/ 1 ba, city lot was 10 years ago! We did finish off the basement to make it 1200 sq ft and added a half bath which add 20k onto our value.

    My aunt bought a 900 sq ft 3br/1ba that was in terrible shape, on a city lot, no basement, for DOUBLE what we paid for ours in another state – the town she happened to buy in had a severe housing shortage.

    All this stuff cracks me up becuase it does SO depend on the area you are in! And it means that what we each need to do depends so much on our own situation. Funny how that works….

    Thanks for your post Crystal!

  • Sheryl says:

    Something I’ve been wondering (and my apologies if you’ve discussed this already and I missed it), but how does it work when you pay cash for a house? Do you hand over one big check? And did the sellers react with shock?

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