Money Management

Mortgage rates are making homeownership more expensive. Keep reading to see what a $300,000 home might look like for you. 

In October, the median existing home sold in the U.S. commanded a price of $391,800, according to the National Association of Realtors. But in some markets, it may be possible to find a nice home in good condition for $300,000.

You may be wondering what a home with that price tag will cost you in terms of a monthly mortgage payment. And the answer is, it depends.

How much are you putting down, and what interest rate can you get?

Three factors determine how much money you’ll owe your mortgage lender each month:

The purchase price of your homeThe mortgage rate you lock inThe amount of money you put down when you close on your mortgage

The stronger your credit score, the more likely you are to snag a competitive interest rate on a mortgage. But general market conditions will also dictate what that rate looks like.

So getting back to our big question, let’s say you’re able to make a 20% down payment on a $300,000 home, leaving you to borrow $240,000. Let’s also say you lock in a 7.29% interest rate on a 30-year fixed-rate mortgage, as that’s the average mortgage rate as of this writing, according to Freddie Mac. All told, that leaves you with a monthly payment of $1,645 for principal and interest on your mortgage.

Can you afford a $300,000 home?

As a general rule, you should aim to keep your housing costs to 30% of your take-home pay or less. So whether you can afford to buy a $300,000 home will depend on how much you earn and what your total recurring monthly housing costs look like.

That 30% shouldn’t just cover the monthly payment you owe on your mortgage. It should also include things like homeowners insurance, property taxes, and homeowners association (HOA) fees, if those apply to you.

Let’s say your homeowners insurance costs $100 a month and your annual property tax bill is $3,000, or $250 a month. Let’s also say you managed to buy outside of an HOA and don’t have to worry about dues. All told, you’re looking at about $2,000 a month in housing costs, which means you’d ideally need a monthly income of about $6,666 after taxes to support a $300,000 home purchase.

If you only bring home $5,800 a month, then a $300,000 home probably isn’t doable for you unless you can put more money down at closing. That could result in a lower monthly payment on your mortgage.

Perhaps you’re able to snag a lower interest rate on your mortgage due to having truly excellent credit. That, too, could give you more wiggle room with those numbers.

The point, however, is to make sure that any home you’re buying — whether it costs $300,000, less, or more — is affordable based on your income. If not, you risk falling behind on your housing payments, and the consequences could be quite severe and unfortunate. You’re better off waiting longer to buy rather than putting yourself in a position where you risk losing your home or becoming delinquent on other bills.

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It can be expensive to travel during the holidays, but that doesn’t mean you can’t stay on budget. Find how to save money during a busy travel season. 

Millions of Americans travel throughout December and January to visit with family and friends during the holiday season. Since it’s a busy time of year and there is more travel demand, you can expect to pay more than usual on travel expenses. But that doesn’t mean there aren’t opportunities to keep more money in your pocket while on your journey.

Here are a few tips that may help make your holiday travel experience less costly.

1. Put your airport lounge perks to good use

Airport food and drink prices are sky-high. Having to pay for an airport meal can quickly make your credit card bill much higher than anticipated. If you have a premium credit card with airport lounge access, make sure you use this benefit this holiday season.

Most airport lounges will likely be busier than usual, but grabbing free snacks and drinks before your flight can help keep your extra spending to a minimum. If you don’t have this credit card perk, you can pack snacks to avoid having to pay for food at the airport.

2. Give public transit a go

Before requesting an Uber ride during your travels, check to see if there are other affordable alternatives to get around.

Ride-hailing services may be more economical if you’re traveling as a family. But otherwise, public transportation could be a much cheaper solution. If your destination has plentiful public transportation offerings, use it to save money on travel costs.

3. Look for discount opportunities for events and activities

If you’ll be exploring during the holidays, look for ways to save money on activities, events, and attractions.

Some cities offer multi-attraction passes to help travelers save. You may also save money on events and activities using membership programs like AAA. Finally, don’t ignore free local events like tree-lighting ceremonies or holiday concerts in public spaces. Every discount adds up and can be a win for your bank account.

4. Consider investing in travel insurance

During the busy holiday season, it’s not unusual for travel disruptions to happen. Before departing for holiday travel, you may consider purchasing a travel insurance policy. Many travel insurance companies allow you to buy a policy until one day before travel.

This protection may give you peace of mind and help you waste less money on travel expenses if things don’t go as planned. It’s also worthwhile to review the terms of any travel protections included with your travel rewards credit cards to know what to expect before you depart.

5. Use the right credit card

When traveling, it’s essential to consider what credit card you use. If you’re traveling abroad, using a credit card that doesn’t charge foreign transaction fees is best so you can avoid paying extra fees. Review our list of the best credit cards with no foreign transaction fees to find out more.

You should also consider which credit card to swipe at checkout. When using one of the best rewards credit cards, be sure to maximize your earnings. Consider which credit card will offer the most rewards depending on the type of purchase you’re making. Doing this can help you earn more rewards while you travel.

Travel doesn’t have to break your budget

If you’re working hard to reach personal finance goals, that’s excellent news. It’s possible to travel during the holidays without ignoring your budget or financial goals. The above tips are just a few ways you may be able to keep your travel spending to a minimum this holiday season. Don’t be afraid to get creative and find other ways to save more money.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.

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Shedding housing debt ahead of retirement doesn’t always make sense. Read on to learn more. 

You’ll often hear that it’s a good idea to try to pay off your mortgage before retirement. The logic is that many people see their income drop once they stop working. So having fewer bills to grapple with could make retirement less financially stressful.

Meanwhile, many people find that their mortgage is their single greatest expense. Having it paid off ahead of retirement is generally a pretty desirable thing.

In many cases, it’s a smart idea to try to be mortgage-free by the time retirement rolls around. But there’s one situation where paying off a mortgage before retiring doesn’t make sense.

When you have a low rate on your mortgage

These days, the average rate on a 30-year mortgage is 7.29%, says Freddie Mac. But in 2020 and 2021, mortgage lenders lowered their rates substantially, allowing many buyers to lock in 30-year loan rates at or around 3%. Plus, many existing homeowners refinanced during that time to lock in those super low rates.

If you’re paying 7% or more on your mortgage, then it could very much make sense to knock out your home loan balance ahead of retirement. But if you’re paying 3% on your mortgage, then it could be smarter to carry that mortgage into retirement and just keep making your monthly payments. This especially holds true if you’re about to retire and are thinking of removing a large chunk of your savings to pay off your home.

Let’s say you owe $20,000 on your mortgage and have a fixed rate of 3% locked in on that loan. Right now, many high-yield savings accounts are paying upward of 4% interest. So in that case, it makes more sense to keep your money in the bank (and perhaps switch to an institution with a more favorable interest rate) rather than put it into your home loan. You can come out ahead financially by earning interest rather than paying off a balance with a very low interest rate.

Also, you never know when you might run into an expensive issue with your home or some other unplanned bill. Having money in the bank is crucial at a time when you’re no longer working. If you’re not being charged a lot of interest on your mortgage, then you might as well leave yourself with extra cash.

Paying off your mortgage is a personal decision

Some people really hate the idea of owing money in any form. If you feel that carrying a mortgage balance into retirement will make your senior years more stressful, then it could make sense to pay off your mortgage even if you locked in a competitive rate and can technically earn more money in a bank account. After all, having peace of mind is important.

But otherwise, don’t necessarily rush to pay off your mortgage before you retire. If you have a low interest rate on your loan, you might as well leave yourself as flush with cash as possible, especially while banks are still paying attractive interest rates.

Once savings account rates start to fall, you can reconsider that decision. But for now, it makes sense for a lot of near-retirees to plan to carry their home loans with them rather than pay them off.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Are you saving enough to buy a home in 2024? Read on to see what the typical buyer expects to spend. 

Buying a home isn’t the sort of decision you just leap into. Rather, you need to sit down to crunch the right numbers and land on a price you can afford.

A good 41% of Americans plan to buy a home in 2024, according to Architectural Digest. And the average home buyer’s budget for the new year is $313,141. But is that a realistic number given where home prices are today?

Home prices remain elevated

In October, the median sale price of an existing home was $391,800, according to the National Association of Realtors. A budget of $313,141 may not go very far in some markets. To be fair, though, in other markets, a budget that size may be reasonable.

However, it’s worth noting that because of today’s housing market conditions, only 1 out of 3 Americans is confident they’ll be able to afford their dream home in 2024. And it’s easy to see why.

On top of elevated home prices, mortgages have gotten very expensive to sign. Mortgage lenders aren’t offering anywhere close to the record-low rates they made available to buyers in 2020 and 2021. Rather, these days, the typical buyer is looking at a mortgage rate of over 7% on a 30-year loan.

How much house can you afford if you plan to buy in 2024?

Almost half of prospective home buyers say they’d be willing to spend about $50,000 beyond their budget to buy their dream home in 2024. But the reality is that going above your budget could be a huge mistake. It could cause you to not only fall behind on your housing expenses, but also, on your bills in general. And that’s something you don’t want to do.

To avoid a world of financial stress, set a home-buying budget that is no more than 30% of your take-home pay. And that 30% should include not just your mortgage payments, but other obligatory costs like homeowners insurance and property taxes.

So let’s say the typical home in your area costs $300,000, and you’re looking at a 20% down payment, or $60,000. That leaves you with a $240,000 mortgage.

Let’s also assume you have great credit and can sign a 30-year loan at 7%. That leaves you with a monthly payment of $1,596 for principal and interest.

Building on that, let’s say the cost of homeowners insurance and property taxes raises your monthly housing costs to $2,000. In that case, you’d want to make sure you’re bringing home at least $6,667 a month. If your take-home pay is lower, then you may need to adjust your budget — and buy a home costing less than $300,000 if you only have $60,000 to put down at closing.

No matter where you’re looking to buy, 2024 might be a challenging time due to higher home prices and borrowing costs. Run your numbers carefully so you don’t end up with a world of financial stress on your hands. And once you do land on a budget, resist the urge to go over it — even if it means having to wait longer to purchase your dream home.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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