Thinking of Moving to a State with Affordable Housing? This is why you want to stop

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For many people, housing is their biggest monthly expense. And if you rent a house or a house, that expense may be more expensive than the next luxury item on your list.

Currently, the cost of housing can vary depending on the part of the country where you live. In other cities, $1,500 will not be enough to pay for your own home.

The same is true when we talk about home ownership. In some areas, a good starter home costs $200,000. In other areas, you may need to spend $1 million or more for a two-bedroom, one-bathroom or guest house.

If you are tired of struggling with the high cost of housing, and you can work from home or find a new job, you may be thinking of relocating to a less expensive part of the country such as a lot of money to buy a house. But while that may be a good plan in general, it may not be your best move right now.

An affordable home doesn’t save a lot of money

Suppose you are tired of paying the mortgage on a $500,000 house, now you’re thinking of moving to a place where you can buy, say, a $300,000 house with just as much space . It’s a good idea in theory. But the number may not be so good because of the cost of borrowing today.

It is more expensive for consumers to borrow money on board, whether in the case of a car loan, personal loan, or the mortgage. And these days, borrowers are looking at more than doubling mortgage rates they would have landed last year.

That’s why moving to a state with affordable housing may not be financially viable right now. It only costs so much to borrow for a home even if the purchase price is low for one, you may not end up reaping a lot of savings.

In fact, let’s say you signed a 30-year mortgage on a $500,000 home and you took out a $400,000 mortgage (in other words, you made a $100,000 down payment, or of 20%). If you lock in a mortgage at 3%, that means you’re paying $1,686 a month in principal and interest.

Now, let’s say you can move to a place where you can buy a $300,000 house, and you can put $100,000 down. In that case, you only borrowed $200,000. If you stick to paying 7% interest on a 30-year mortgage, your monthly principal and interest payment will be $1,330.

Say, you’re looking to save about $350 a month. It’s nothing. But maybe not a life-changing amount.

Also, keep in mind that there are transfer costs, as well as the cost of taking out a mortgage – namely, the closing costs to complete that loan. All that said, it may take some time before you come out ahead financially.

It’s a smart move in another lending environment

Moving to a state with affordable housing makes a lot of sense when the loan rates are cheaper. But with mortgage rates so high right now, it could pay to put those plans on hold.