If you’re a homeowner in an expensive city, you may have been amazed when you learned what your home price could buy you elsewhere. The price of a studio apartment in Manhattan may well pay for a mansion in a mid-sized town in Minnesota.
Have you ever considered moving to a cheaper place so you can afford a bigger or nicer house? If the job you do can’t be done elsewhere, the idea’s a nonstarter, except if there are cheaper areas you could commute from. But if your job is the kind you can take to other cities, you may wonder whether you’d be better off a few towns—or states—over.
Don’t act too fast, though. The calculus may not be as simple as it first appears. Yes, it’s true that the same money will buy you more—or less—house depending where you are. But there are quite a few other factors that may impact how much you can really afford in the new locale.
First, consider heating and cooling costs. If you are moving to a colder or warmer climate than your current one, you’re bound to pay more for one or the other, especially if you’re moving to a big place.
Then there’s the question of property and income taxes, which vary widely from place to place. If you’re moving somewhere with higher taxes than you currently pay, that’s a bite out of your buying power.
It’s a similar story with interest rates, which vary from place to place and time to time, so you can’t count on getting the same rate on the new house as you did on the old one. Of course there’s the chance you’ll get a better rate, but if you don’t, you’ll be paying more for a house that costs the same as the former one.
A lot of people dream of living somewhere cheaper so they can get someplace bigger. But consider the costs that come along with owning a bigger house: more maintenance, lawn care, cleaning, furniture, and energy use. These things cost money, again reducing how much you can afford.
There’s also the question of the age of the new home. Older homes typically end up needing more maintenance and more expensive fixes and remodels. They also tend to be draftier and less well insulated, which translates to higher heating costs.
When you take all these factors into consideration, is a new home in a different area such a good deal? Each situation will be different, so it’s worth thinking carefully about your plan before you hire the moving van.
Are you thinking of moving to a cheaper city? After considering all these factors, is your decision still the same?