This may be the toughest post you will have ever read on this site. Why? Because it assaults the pride of men and a woman’s need for security. For many, this will not apply but for some it’s a hard pill to swallow:
If you have debt and your mortgage payment is 40% of your take-home pay then you can’t afford the house.
You can not prosper financially when you have a house payment equal to or more than 1/3 of the money you bring home. Owning a home is a great financial accomplishment and smart decision, but it needs to be bought properly. If you find yourself in a tough mortgage situation this may not be the best time to sell, but that doesn’t make keeping the house any smarter.
A couple I was witnessing to was having some success on paying down their debt. They built their baby-emergency fund twice after repairs were necessary for their truck and air conditioning unit, even when their house payment was 46% of their take-home pay. But they gave up hope of ever getting out of debt and are deciding to file for bankruptcy protection. But here is the kicker, they are deciding to keep the cars (and the payments) and the house. They feel that the emotions of their situation are so debilitating that they can’t see that the problem or the solution.
But owning a home is an investment: Not when they foreclose and sue because you couldn’t make the payments.
But renting is like throwing money away: Not when you are working on your other goals like paying off debt, sending children to a good school, or maintaining the proper distance from/near the in-laws.
But I need a lot of space to store my fill-in-the-blank: You might consider selling some of that stuff on Craig’s List and paying down the debt. Or you could always rent a storage shed for $40 a month (much cheaper than the interest portion of a mortgage payment).
Debate, discuss, and don’t rush into a decision either way. But please, have the hard discussion if you find yourselves in a tough situation before you spend too much time, effort, and emotion in order to keep a part of “The American Dream”.