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5 Reasons to Think Twice Before Buying a Bigger Home

Homes today are much bigger than they were just a few decades ago. In 2015, the average size of a home hit an all-time high, and the median size of a new home also hit a new record. The average home size in 2015 reached 2,687 square feet, compared with an average of 1,660 square feet in 1973 -- even as the number of people living in each household has declined.

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When you're buying your own home, it's up to you to decide if you want to buy into the bigger-is-better trend or embrace a growing movement toward more sustainable and smaller housing. If you're considering the big house, though, you may want to think twice. Here are five big reasons why.

1. Higher mortgage payments 

Housing prices vary dramatically depending upon where in the country you live. However, there is one universal rule: A bigger house costs more money than a comparable smaller home in the same neighborhood. The median price per square foot for construction of a single family home in 2015 was $103 per square foot, so an additional 1,000 square feet could add over $100,000 to the cost of a new build.

Say you're considering a 2,000-square-foot home that costs $200,000 and a 3,000-square-foot home that costs $300,000. Let's assume you plan to pay the recommended 20% down and mortgage the home over 30 years at a 3.92% interest rate. The monthly payments on the smaller home would be $756, and you'd pay a total of $272,000 including interest. But for the larger home, you'd be looking at a monthly payment of $1,134 and a total mortgage cost of $409,000. Not only that, but you'd have to pay $20,000 more up front for the bigger house to reach the 20% threshold.

2. Higher property taxes

Property taxes are typically calculated by multiplying the assessed value of your home by the millage rate in the area where you live. If your home is larger and more costly, you'll pay more in property taxes. New Jersey has the highest average effective property tax rate at 2.38%, while Hawaii has the lowest rate at 0.28%. Let's assume the property tax rate where you're house shopping is somewhere in the middle at 1.3%, and you're looking at a house assessed at $200,000 and a bigger house assessed at $300,000. The annual property tax on the larger home would be $1,300 higher. Over the course of 30 years, that would add up to $39,000 (not accounting for changing taxes or home values).

3. Higher utility costs

When you have a larger home, you have more space to heat and cool. While the cost of energy varies dramatically from location to location and from fuel type to fuel type, adding on additional square feet could mean you need millions of additional BTUs to heat your house. An extra 1,000 square feet of space could easily cost you $100 or more per month, given that you'll have more air to cool and heat, more exterior surface area to lose that cool or warm air, and more lights and appliances to power.

And don't forget that if your larger home comes with more rooms and a bigger lawn, you'll need to spend either more time or more money on maintenance, repairs, and renovations.

4. More furniture to buy

If your home is larger, you'll have more rooms to furnish. If you have a separate eat-in-kitchen and a dining area, that means an additional dining set. A formal living room and a casual family room means double the sofas, coffee tables, end tables, lamps, and accessories. And more bedrooms means more mattresses, box springs, bedroom sets, dressers, and additional accessories like lamps.

Bedroom furnishings are typically the big-ticket item for new homeowners, with sofas coming in a close second. Average homeowners spend more than $700 on sofas alone, so buying an extra sofa or two for a formal living room could cost you almost as much as the mortgage payment on a smaller house. 

5. Bigger houses take longer to sell

Because larger homes are more costly, the pool of buyers is smaller, and the houses take longer to sell. If for whatever reason you need to move in a hurry -- say you got a new job, or you can't keep up with your mortgage payments -- then it could become a major problem if you're unable to sell your house within a short time frame. If you own a smaller, cheaper home, then you may be able to relocate to a new home and pay both mortgages until you sell your former home. But if you're already stretching to meet your current mortgage payment, then you could end up trapped in your home -- along with its higher utility costs and property taxes -- until you manage to find a buyer.

This is not to say you shouldn't buy your dream home just because there are more modest options on the market. However, before you commit to living large in a big home, make sure you and your family are prepared to support the extra costs for years to come.

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