The growing trend in America, as has been for many years, is to get the biggest and best home that one can possibly afford. Generally, new homeowners buy homes up to the maximum amount possible based on their income, credit score, and debt to equity ratio. What many homeowners don’t take into account when deciding to purchase a new home is the effect the cost of their utilities, heat and/or air conditioning will have on their monthly cash flow. The desire to have the very best is tempting, but the back end costs can really add up. Utilities on any home can become very costly in the winter and summer months. With the increased desire to purchase larger homes there is the added responsibility of larger and larger utility bills.
For an example take Joe and Mary. They have been married for a year and are ready to purchase a home. Joe works for a growing national company in management, and Mary works at a local company in accounting. Together they earn a cumulative household gross income (before taxes) of $80,000 a year. After speaking with a realtor and mortgage broker, they determine that the maximum mortgage loan they are qualified for in order to purchase a home is $1,933 which includes the payments for principal and interest, taxes, and homeowner’s insurance. Mary and Joe are excited to purchase a newly built home in a great neighborhood they found, just the style and statement they are looking for, and right at the maximum amount that they are qualified for. Mary and Joe don’t necessarily need this large of a house since it’s only the two of them for now, but see that in the future they will use the rest of the space because they want to start a family. However, this home’s mortgage payment including taxes and insurance are the maximum they are qualified for and it would definitely make money a little tighter for them then what they are used to, but home ownership is the American dream and they want the best house they can get so why shouldn’t they get it?
Five years later, 2 kids and a dog, that once slightly tight budget has gotten much tighter. With minimal increases in salaries and multiple increases in expenses such as gasoline, food, etc their once sufficient cash flow has become a series of budgets and sacrifices.
When consumers like Mary and Joe purchase homes and don’t take into consideration the cost to operate their home, they can end up being financially strapped—“house rich cash poor”. With energy costs rising continuously, utility bills are not expected to go down any time soon, if ever. The market place is unstable, it is a time of war, costs of everything seems to increase almost daily, quality seems to be diminishing and job stability certainly is not what it was 30 years ago. That once affordable 2350 sq ft home is getting more and more expensive to keep warm and cool.
When consumers are at their maximum on debt to equity ratios and utility bills only continue to rise, it becomes a matter of “robbing Peter to pay Paul”. That once simple mortgage payment of $1933 is often times cannibalized to pay utility bills that must still be paid even when times are tough. 30 Year fixed mortgage loan payments stay the same while energy costs do not. One can be paying $150 in April for electric but when the summer’s blistering heat happens that bill can double or even triple and leave homeowners searching to come up with an extra $300 or $400 per month—the juggling act known as “robbing Peter to pay Paul” begins. When funds become tighter as home utility bills increase, the funds needed to cover these increased costs must come from some where. Credit cards are frequently used to pay these reoccurring monthly expenses. The juggling act is now in full swing and it is not long before the decision becomes whether to pay the utility bill or the mortgage payment. By the time one is at this level of choice it is not very long before one finds them self either in foreclosure or without electric power.
There are some people that do not think financial problems will befall them and then there are some people afraid to move forward fearing something catastrophic will cause them financial ruin. It does not have to be an “either or” situation. The more you know about energy efficient homes the less likely you are to end up in an unpleasant home ownership situation as described above. When looking to purchase a home, one must learn more than just the acquisition cost of the home. Consumers must begin to take into account the energy operating costs of the homes they are purchasing. The larger the house, the larger the utility bills will be unless it is energy efficient. An energy efficient home will add comfort to your lives and dollars to your pocket.
Copyright © 2006, Energy Efficient Home Team™
The Energy Efficient Home Team™ is a success story in energy efficient home technology dating back to the mid-1980s. They have proven time and again that their Ecobuilt™ building envelope technology makes them the 21st century’s leading experts in energy efficiency in homes. Visit www.energyefficienthomearticles.com where they are featured writers under the heading: energy efficient homes. |
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