Smaller is the new paradigm

Even though the average size of new homes is, at more than 2,600 square feet, almost 1,000 square feet larger than a home built in 1974, it has actually leveled off and even decreased in recent quarters. Huge homes equal huge expenses and not a lot of residential value. Larger homes cost more to heat and cool, and a big house needs staff to operate. Plus, the local government will see that mansion on the hill as a massive asset to be taxed.

Spend time in a large home, and you’ll discover that by-and-large the owners spend virtually all of their time in a few choice spaces such as the kitchen, informal dining room, den and the bedroom. Most of us can enjoy the same utility with a well-designed home or condo of 2,000 square feet or less. Maybe that’s why people routinely downsize as they age. It doesn’t make much sense retire to a larger house.

If you don’t have a big home, you don’t have to use a big mortgage to finance your purchase. Small mortgages mean small monthly payments, which allow you to spread your income out to other areas of your financial life.

Small home mortgages also give you the flexibility to borrow on 15 year terms instead of 30 year terms. Doing so will save you tens of thousands of dollars in interest over the life of the loan. And you’ll own the house free and clear 15 years sooner than you would if you took out a big, 30-year mortgage. Once you have no more mortgage payments, what will you do with all that extra money each month? I’m sure you can find something.