I have a fever. It is the “I really want to move and have more space” fever. Have you ever had it? Fortunately, there is no way on earth we are going to move right now so I can look at houses online all I want and there is no temptation to actually act. Short of truly Divine intervention, we won’t be moving for at least a few years.
House Sizes and Associated Costs
But as I contemplate moving someday, I’ve been thinking about house sizes and the associated costs. We have what would probably be considered a moderately smaller house (two stories, 1200ish square feet, 600 square foot basement that is not finished and can’t be finished). We are on a smaller city lot. Could we live here forever? Of course. We could make it work since it is only the three of us. However, given that we work at home and plan on homeschooling, it would be nice to have a bit more room.
The tricky part is deciding how much “a bit more” is and how much we are willing to pay for it. If you run the hard numbers it is enough to make your stomach churn with the reality.
Calculating Cost of Additional Square Footage
Let’s suppose someone buys a house and overbuys by 200 square feet. Maybe they get an extra bedroom they really don’t need or a main floor laundry or an extra bathroom or whatever. It doesn’t matter really what it is. They just buy more house than they really need. An extra 200 square feet doesn’t sound like much, does it? But let’s run the numbers.
The average cost of a square foot in a normal real estate market should be around $100. This will vary regionally and so on, but it is a good number with which to work. So paying for 200 square feet will cost someone about $20,000 (200 x 100). Except it won’t cost that. Not if they take out a mortgage.
If they take out a 30 year mortgage at a fixed rate of 6.0%, they will add $119.91 to their monthly payment for those 200 square feet. Over 30 years (360 payments) that will cost them $43,167.60 of which $23,167.60 of that will be INTEREST.
Yes, that extra 200 square feet will cost an extra $23,167.60 in INTEREST alone.
But that’s not all. That person also has to insure it, pay taxes on it, heat it, cool it, decorate it, vacuum it, light it, and otherwise maintain it for thirty years. So tack on some more $$$ each month for that extra space.
See what I mean? Buying only what you truly need is really important.
If you want to take it a step further, imagine if they invested that money each month into just a basic account that earned them a little bit of interest each month. If instead of paying on a mortgage the person put the $119.91 each month into a savings account earning 3.0% interest, it would be worth $69,875.97 at the end of 30 years. If they could get 5.0%, it would be worth $99,796.13.
It’s enough to make me think that maybe we don’t need more space. Thankfully we don’t have to decide right away.