We visited with some friends this weekend at their new house! Huge, perfect, lovely. They got the lifestyle they wanted! It's 2400 sq ft house with 4/2.5 ba, attached 2 car garage, and unfinished basement, all for the rock bottom price of $650K! Amazing deal. So what's the catch?

Well they commute a solid hour without traffic and if they had to work rush hours it'd be closer to 1.5-2 hours. They live about 45 minutes from me without traffic. So it's not an easy commute and they admit that. But it's the lifestyle they wanted and they got the house they wanted at a price they could afford. We talked about it, they work close to where my DH works. And the truth is with 2 kids and a stepchild they make huge commuting sacrifices and even seeing her stepson less (he lives in the city with his mom and prefers to stay weekends to hang out with friends). But they now have a bedroom for each kid and space they didn't have before.

So my DH and I were in lust. Yeah as we looked at the brand new construction we sighed. Very cute. We agreed the sq ft and use of space was perfect. I'd change only a couple things, full bath on first floor instead of half bath, and open floor plan instead of dining room and nix the office. But size wise the house felt super large and there was tons of closet space and storage. Honestly it was more than adequate for us we both agreed.

So now I know that 2400 sq ft is more than we'd need, I suspected around 2000 depending on layout but most people I know with new construction have 4000+ sq ft, and yes it's over $1.7M. So I couldn't accurately gauge what a smaller new house would feel like.

I'm so happy my friend got the house of her dreams and the life she wants. She got everything she wanted and it is worth celebrating. I hope I get to that point as well where everything falls into place. They even managed to sell their other two homes without losing their shirts! CHEERING!!! They had been carrying one of them and shelling out $500/month because the rent didn't cover the mortgage and they were about $75k underwater. They did it! Consolidated and got something perfect they wanted. The success for them is great.

But life is about choices. And my friend said they consciously decided to live far from friends and work because they liked the quirky nature of the town they bought in, the house and lot was rural and private, and the lifestyle on the weekends of being in nature. No they are not retiring early or anytime even close to soon and this commute will be happening I would guess another 15 years. But if they decide it's too hard they can always change their minds. BUT they seems super happy with the house so I doubt it! I applaud their brave decision to go do something different.

I kind think that's the best case. If you want to change your life you do it. Life's about choices. And when it's not working you change it. And if it's still working you change it again. The only pitfall? You have to live with the choices you make.

So a long, long time ago my mom said something that often resonated with me. She talked about people affording the expensive homes and flashy cars. My parents are those millionaires next door and so are my in-laws. And my parents are also the people who spend money like water, but have always out earned stupid. They've made so much money that it's never mattered how they spent it.

But my mom still preached financially responsibility and buying what you can afford. She said it's not bad to buy a big home or luxury vehicle if you can afford it. The problem is? Affording it. Really affording it. Not affording it on a shoe string.

Sure you can afford the monthly note on either a $500k home (this was a long time ago) or $50k car. But what happens when you need to repair it? Why would anyone want to buy a $500k McMansion and then have to clean it themselves? To really afford a house that big and expensive then you should have enough fat in the budget to hire someone to clean it. Be able to hire someone to fix something if breaks. You shouldn't be worrying about every little repair because if so you can't afford the house. The house is more than the payment monthly.

Same with the car. Her example was if you are sweating buying $400 tires for your luxury car then why did you buy it? Or $1k repair? Did you not realize the car is more than just the payment? Or the more expensive the car, typically the more expensive the repairs? We're not talking older versus newer car but rather brakes on a Toyota versus brakes on the Lexus.

That got me thinking that I would always try to underbuy what we could really afford so I'd have lots of fat in the budget to deal with all the extras. That I could own my house and car and take care of them and not worry they would rule my budget. That the next repair was too expensive and I'd put it off.

Turns out my mom gave good advice. Did you overbuy?

When we bought our townhouse in 2005 we bought using an 7/1 ARM @ 4.25% for $460k. We figured we wouldn't be here in 2012, hahahaha...We're still here in 2014. BUT we've saved a ton in mortgage interest and we've still got an adjustable rate mortgage.

Back in 2011 we refinanced to a 5/1 ARM at 3.125% $416k. A year later in 2012 we refinanced to another 5/1 for 2.625% for $410k. Both times was no cost mortgage, so our rate was higher than if we had paid but it didn't cost us anything to get a cheaper rate.

Our current mortgage caps out in 2020 @ 7.625%. It starts increasing in 2017 @ 2% annually and caps out with a lifetime minimum of 5%. Who knows where rates will be but since we're paying down approximately $800/month or $10k/year we could easily handle the increased interest rate or we could refinance before then. Seriously we've saved a ton in mortgage interest and we've been paying down the mortgage faster because of it.

We have 33% equity in our house now based on purchase price, and with current appraisals/sales I know we're looking at a sale price of $725k-$750k and we owe around $390k so we have about 50% equity and we'll be paying off more the longer we stay put.

The joys/sorrows of living in such a HCOLA. It's an old, tiny townhouse. But it also could be the bedrock of our future plans.

Have you considered an ARM?