Don’t let your McMansion turn into a financial McPrison

A real estate firm argues buyers shouldn’t buy a home that could turn into a McPrison:

McMANSION OR McPRISON?
WHICH ONE WOULD YOU RATHER HAVE?

The sprawling McMansion that someone said you can afford may quickly turn into a McPrison when all of your money is locked up in it. There are lots of home affordability guidelines out there. Start with this one:

  • Don’t spend more than 300% of your gross household income.
  • Another is to pay no more than 150 to 200 times the monthly rent of a comparable property.
  • All of that said, don’t buy a home unless you plan to spend at least seven years in that area.

Some conservative guidelines for buying a home, particularly from those whose livelihoods depend on moving houses. Yet, the contrast between a McMansion and a McPrison is interesting. According to this advice, the main negative of a McMansion is that it can cost too much. The McMansion can appear to be a good thing that ends up trapping the homeowner. This has been a common argument after the economic crisis: too many people and lenders overextended themselves in purchasing and enabling McMansions. Part of the definition of McMansion from Investopedia reinforces this idea:

Many McMansion homeowners live beyond their means as mortgages on these monstrous properties may be 100% mortgages, interest-only mortgages and/or amortized over 40 or more years. The cost of utilities and maintenance in a larger home are also more significant, as is the cost of commuting from the distant suburban settings in which these homes are often located.

Two quick responses:

1. Of course, non-McMansions can be pricey as well depending on their size, location, and design.

2. Ultimately, this ignores the numerous other critiques leveled against McMansions (i.e., you could be trapped by a lack of community in McMansion neighborhoods) and focuses on the financial implications. If the homebuyer wanted a McMansion and could financially make it happen, there is nothing on this page to suggest the realtors would disapprove.

Financial advice for young adults: don’t buy a series of McMansions

A set of “10 Pillars of Financial Independence” includes advice about avoiding McMansions:

Therefore, their choices are to sacrifice a bit now so that in 30 years they have a home paid for and $204,958.63 in the bank, or a slightly smaller house payment and a home paid for without a good start on their nest egg. Many of the choices you make 10-20 years ahead of retirement can pay off very well when you want to retire.

I’m a firm believer in paying for your home as soon as possible. Unfortunately, beginning with a starter home and moving up to McMansion after McMansion has become commonplace; this habit can make it practically impossible to pay off your home in a timely fashion.

The general advice sounds good: beware of long mortgages for houses you don’t need. Instead, take the money you could save with a smaller mortgage over a shorter period of time and invest it.

However, the idea of people buying McMansion after McMansion after having a starter home sounds exaggerated to me. Perhaps I might be wrong: do McMansion owners tend to live in multiple such homes over their lifetime? Are they more or less likely to move than others? The illustration makes sense – don’t keep purchasing home after home that you can’t afford – and fits the idea that Americans overconsumed in the late 1990s and early 2000s. But, I would be interested in knowing more about serial McMansion purchases…