I thought I got a good deal, but my house is eating up too much of my income – am I stuck?

Meet Maria, a 41-year-old paralegal who bought her first home in 2021, thinking she got a great deal. The mortgage rate was low, and the price seemed right at the time. Fast forward to today, and she’s facing some unexpected financial stress. Rising insurance premiums, increasing property taxes, and the constant upkeep of homeownership are all piling up. What seemed like a great investment is now eating up more of her income than she’s comfortable with. Maria is wondering if she should tough it out or consider making a change.

Maria’s situation is not uncommon. The rising costs of owning a home—especially in a time of increased taxes and insurance rates—can turn what initially seemed like a smart purchase into a financial strain. Here are some possible paths for Maria to consider as she weighs her options.

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1. Assess the Total Cost of Homeownership

First, Maria (and everyone, for that matter) should sit down and take a close look at all of the costs associated with her home. This includes the mortgage, property taxes, insurance, repairs, utilities, and general maintenance. By doing so, she’ll get a full picture of how much of her income is going toward the house each month. Many financial experts recommend that housing costs shouldn’t exceed 30% of your income. If Maria’s costs are significantly higher than this, it might be a sign that something needs to change.

That said, Maria should also keep in mind that her 3.1% mortgage rate means a significant portion of her mortgage payment is going toward principal. This is quietly building her equity in the home, which could pay off in the long term, especially if home prices in her area continue to rise. In other words, even though her housing expenses feel overwhelming now, she’s increasing her stake in a valuable asset every month.

2. Look for Areas to Cut Back

If Maria loves her home and doesn’t want to move, she can explore ways to reduce her expenses. For example, she might shop around for more affordable homeowner’s insurance or consider raising her deductible to lower premiums. She could also explore options to appeal her property tax assessment, especially if home values in her area have risen dramatically since she bought the house. Home maintenance costs can also be managed by focusing only on essential repairs and deferring any non-urgent upgrades until she’s in a better financial position.

3. Consider Downsizing or Selling

If Maria finds that no amount of cost-cutting will make her home affordable and sustainable, she might want to consider selling. Downsizing to a smaller or less expensive home could free up significant cash flow and reduce her monthly expenses. While selling the home could feel like a step back, it may ultimately relieve financial stress and improve her quality of life. Before making this decision, she should assess the local real estate market to determine if now is a good time to sell.

She could also look into renting for a while, which might give her more flexibility and allow her to save up while planning her next move.

4. Rent Out Part of the Home

If Maria isn’t ready to sell but still wants to offset some of her costs, she could explore renting out part of her home. Whether it’s an unused bedroom or a basement apartment, bringing in rental income could help her manage the monthly expenses. Maria should make sure to check local zoning laws and homeowner’s association rules before pursuing this option, but it could be a way to ease the financial burden while keeping the home.

5. Revisit Her Budget

In addition to addressing her home expenses, Maria might need to revisit her overall budget. Sometimes lifestyle inflation happens quietly, and reviewing all spending categories could help her identify areas where she can cut back and free up more cash to make homeownership more manageable. For example, dining out, subscriptions, or vacations could be scaled back temporarily to make the housing costs less burdensome.

Given the complexity of her situation, Maria would benefit from speaking with a financial advisor. An advisor can help her assess whether staying in the home is feasible or if selling might be the better option for her long-term financial well-being. Advisors can also help her consider the tax implications of selling and identify other opportunities to improve her financial situation.

It’s important for Maria to work with a fiduciary financial advisor, who is legally obligated to act in her best interest. A Certified Financial Planner (CFP) can offer comprehensive advice and help her weigh the emotional and financial pros and cons of keeping or selling her home.

It’s Not All Bad News

Maria’s dream home has become more of a financial burden than she expected, but she has several paths to consider. Whether she cuts costs, explores renting out part of the home, downsizes, or reconfigures her budget, the most important thing is for her to take action sooner rather than later. With a low mortgage interest rate and increasing equity, Maria is still building a valuable asset—even if the costs feel overwhelming now. Consulting with a financial advisor will help Maria decide the best course of action to balance her desire to stay in the home with her long-term financial goals.

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