House Poor

Definition

The term “House Poor” is used for people who spend much of their income for home ownership. In most cases this is the down payment of mortgages. The reason that they are coined as “poor” is because after the monthly mortgage payment there is very little discretionary income left. Discretionary income simply means all the money ready to be spent that is after taxes and loan and credit payments. 

Disadvantages

Many people become house poor in modern societies, because they borrow to the limit. This result in less enjoyment of the active, young- and middle aged part of their lives. It also brings about a large insecurity, as the potential loss of job is likely to bring about difficulties in meeting the loan payment obligations.

Another disadvantage is that many short term good investment opportunities have to be missed. 

Advantages

An advantage to payment of the mortgage of a larger value property is that in the long run, property is the most probable to increase in value.

Also, at retirement age, a larger house doesn’t only make the living environment more enjoyment. It also provides a security as the house could be sold in case of money shortages.

More mortgage payment usually means that the loan pays for a larger home, which means that growing families (new children born) can be accommodated at a relative low expense compared to selling and then moving into larger apartments or houses when a new baby is born. 

Disadvantages

Many people become house poor in modern societies, because they borrow to the limit. This result in less enjoyment of the active, young- and middle aged part of their lives. It also brings about a large insecurity, as the potential loss of job is likely to bring about difficulties in meeting the loan payment obligations.

Another disadvantage is that many short term good investment opportunities have to be missed. 

Advantages

An advantage to payment of the mortgage of a larger value property is that in the long run, property is the most probable to increase in value.

Also, at retirement age, a larger house doesn’t only make the living environment more enjoyment. It also provides a security as the house could be sold in case of money shortages.

More mortgage payment usually means that the loan pays for a larger home, which means that growing families (new children born) can be accommodated at a relative low expense compared to selling and then moving into larger apartments or houses when a new baby is born. 

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