How much is your mortgage really costing you?

The best personal financial advice the bank gave the Trouts is that in addition to a large mortgage, they can finance more by creating a secured LOC. If you do not accept all the personal financing that the bank offers, they will offer you additional financing at the preferential price + 1% (more or less) for 80% of your appraised value. And if you don’t know how to set up your own personal budget and finance books, you’ll need help with debt. Here is Trout-CO’s personal financial statement (new fixed monthly expenses)

• Mortgage: $2,000 (minimum payment)
• Property tax: $715
• Home maintenance (utilities + insurance): $1,000
• Phone/cable bill: $250
• Transportation: $3,300
• Bathrooms: $135

Total = $7,400

Trouts’ “house” cost center, which sits squarely on the fixed expense portion of his pie, accounts for nearly 53% of his net income. Thanks to the solid financial advice of the bank Trout-CO is in the leverage zone. Furthermore, regardless of what the bank has approved them for, they can’t afford this house. This is why.

You see, it took the Trouts over 3 years to save that $100,000 down payment. All they scraped together after earning $14,000 each month was a measly $2,700 during a time when they were renting a two-bedroom apartment for $1,200 a month. Now, her minimum monthly payments for living expenses (without transportation) are increasing from $1,200 to almost $4,000. Your clothing/household cost center is about to be devastated by all the things you need to buy to make your home livable and there will be all sorts of hidden expenses that will arise as a result of moving from an 800 sq ft 2 apartment home. two-bedroom in a 2,800-square-foot 4-bedroom home. For one thing, if your bathroom needs fixing, it’s not a simple call to the superintendent.

The irony with the Trouts is that just because they didn’t accept the bank’s full million-dollar offer, they’re being frugal… even “clever.” After all, they make a lot of money… right? What can this $661,660 home purchase mean for the future of Trout-CO? What will Trout-CO be like in 5 years? The Trouts think they are doing well. But in reality, they have no idea…they don’t control their spending (the cornerstone of any personal financial management system); they do not perform TCO analysis and have no idea what the return on investment will be in your home. All they know is that they took less than the bank “approved” them. Ahhh… the most nonsense “approval” of marketing. Do you need approval to give your hard-earned money to the landlord of your choice?