Smaller vs. bigger: Save half a million dollars with this home ownership hack

I love the tiny house movement. Tiny homes are cute mobile homes under 500 square feet, sometimes as small as 300 square feet. Their popularity has risen in part due to the recession of 2008, the minimalist movement, and the fact that millennials are strapped down with way too much student loan debt.

The concept is simple: Less is more, especially when it comes to your wallet! And for good reason. Traditional mortages can cost you twice as much as the selling price of a home once you factor in interest. But even if you aren’t too keen on living in a box as small as a tiny house, considering a smaller home instead of a larger one can be very beneficial to your wallet.

How choosing small can save you nearly half a million dollars

Let’s say you’ve been dreaming of owning a home. You have a steady job and you’ve stashed away a nice down payment. Your real estate agent says you can afford a $500,000 house. “Great!” you say. But, not so fast. Do you really need a $500,000 home? Yes, your family might grow, but how much of a difference in cost are we talking here?

Let’s do the math. Over the course of 30 years, a $500,000 home will cost a total of $985,097.53 with interest, while a $250,000 home will double in total cost to $543,548.77 with interest. That’s a $441,548.76 difference! The interest paid on a $250,000 home will cost $179,673.77, while the interest on a $500,000 home will cost $359,347.53 at 4%.

Although the interest makes a home cost nearly twice a much, this is something the home ownership industry rarely talks about. That is, until you get to the final loan signing process and you sign a paper that shows how much you’re actually paying!

If you had the option to choose between a $500,000 and $250,000 home, which would you choose? Think of what you could do with nearly half a million dollars. That could help to fund a retirement account, send you kids to college, heck, even travel the world! …all from a tiny choice to choose smaller over bigger when it comes to a home.

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