57–Lever #5: Interest Paid (Part Four–Buying a House)
Buying a house can financially lift your future or weigh it down
If you’re in your 20s or 30s, you’re probably already making many financial decisions—some small, others big. Buying a house is one of the big (actually, huge) ones that will have a significant impact on your finances. It will impact your cash flow and long-term financial health, as well as your ability to manage your resources effectively for the future.
Purchasing a house affects your financial life equation (FLE) in several ways, some of which are negative and some of which are positive. It will likely increase your expenses (E), interest paid (IP), and taxes (T), all of which are negatives (a “subtrahend” in the formula). However, to the extent that the house appreciates, it could increase your net worth (W). Of course, renting does not have a positive contribution to the FLE, but the negatives may be much less. So, in that sense, you might view it as a positive.
One of the reasons the impact on your FLE is so high is that it’s not just the size or purchase price of the house (although these factors drive other aspects), but also the ripple effects: mortgage payments, property taxes, insurance, maintenance, furniture, and utilities. A bigger house usually means more money going out the door every month.
Let’s be honest: our culture doesn’t exactly make this easy. We’re constantly told that success means owning a big, stylish home in the right neighborhood. And many of us feel the pressure to “keep up,” even if that means taking on more debt than we can comfortably handle. And that bigger, fancier house comes with a host of additional costs. Biblical stewardship calls us to a different path, one of wisdom, margin, and contentment.
So, let’s talk about how to think wisely about buying a house, especially if you’re just starting out. The cost of housing touches everything: your budget, your giving, your ability to save and invest, the demands on your time, and even your stress level. That’s why the house decision is one of the most important stewardship choices you’ll make in your 20s or 30s. So let’s look at some principles to guide you in making a wise first-home decision.
The most important guidance I can give you is to buy below your means. If you’ve been pre-approved for a mortgage, you probably noticed the lender was willing to provide you with a lot of money. That doesn’t mean you should take it.
In fact, I recommend a far more conservative approach—one that may seem countercultural, but is grounded in wisdom. Dave Ramsey says to keep your total housing costs (PITI—principal, interest, taxes, insurance) to no more than 25% of your take-home pay. I wholeheartedly agree. In today’s housing and interest rate climate, I might increase that to 28% and certainly no more than 30%.
Even better, aim for a 15-year fixed mortgage. Yes, the monthly payments will be higher, but you’ll pay off your house much sooner, save a ton in interest, and gain peace of mind. That’s a long-term win.
If you’re tempted to go big on your first home, pause and take a breath. There’s no shame in starting small. In fact, starting with a modest home can be one of the smartest moves you’ll ever make. (Of course, that may be all you can afford, and that’s okay.)
If your spouse’s income covers the mortgage, consider saving the other’s income to build up your down payment. That way, you reduce your mortgage amount, lower your monthly payment, and increase your financial flexibility. Also, if at all possible, try to qualify on only one income. That will give a new mom the ability to stay at home if they want to and you’ll still be able ot pay the bills.
Renting isn’t throwing money away. If you’re not ready to buy—or if the math doesn’t work for you yet—don’t sweat it. Remember, you have to live somewhere, and most of us can’t do that for free. Renting can actually be the wiser choice, especially if:
You’re not sure how long you’ll stay in one place
You’re trying to save for a larger down payment
You’re prioritizing flexibility over permanence
Don’t fall for the myth that “renting = wasting money.” The truth is, both renting and buying come with costs. And as I said earlier, owning a home means you’re on the hook for more expenses than you might realize or would be able to handle.
To know whether buying makes sense for you, compare the effective monthly cost of ownership to rent in your area. As a general rule of thumb, for every $100,000 in home price, expect to pay around $1,000 per month in total costs. Therefore, a $250,000 house may cost you approximately $2,500 per month. If you can rent for significantly less, it may be worth holding off if you’re unsure you can afford it.
Avoid the house “wealth illusion.” When your friends start buying bigger houses (or showing them off on social media), it’s easy to feel left behind. However, be cautious; what appears to be success from the outside can actually be a significant financial strain on the inside. Many people buy homes they can’t truly afford. And if their income changes or expenses rise, the whole thing can collapse on them. Wise stewardship means living within your means, not pushing the limits or exceeding them to get the perfect house.
In 2025, mortgage rates are expected to remain significantly higher than the ultra-low levels seen a few years ago. That’s made affordability even harder for many young buyers. But don’t let FOMO (fear of missing out) rush your decision, causing you to take on a larger mortgage payment than you can afford. Instead of asking, “Can I buy a house right now?” ask, “Can I afford this house without stress, and will owning it allow me to still save, give, and invest as I know the Lord wants me to?”
You might consider an adjustable-rate loan, but don’t do it expecting rates to return to their previous levels; that’s unlikely to happen anytime soon, if ever. Of course, there’s also the risk that rates will rise, which could be devastating to ARM holders depending on how much and how fast they rise and the terms of their loans.
Save up a larger down payment. The larger down payment you make on a house, the less you’ll have to borrow. Additionally, paying more upfront may also result in a slightly lower interest rate (the lender is taking less risk). This all adds up to lower monthly payments and less interest over the life of the mortgage loan. Shoot for a 20 percent down payment if you can. That may take time to save, but it will be worth it in the long run.
Consider buying a fixer-upper. Foreclosures can also be a good deal if you can find one that suits your needs. Buy the cheapest house you can afford in the neighborhood where most of the houses cost more.
Finally, before signing up for a mortgage, ensure that all other debts are paid off and that you have a working budget and the ability to handle the total expense of homeownership. Additionally, ensure you have an emergency fund of 6 to 12 months' worth of expenses. Emergencies happen, more often it seems, when you own a house.
Buying a house is a significant financial milestone and a major life event. It’s exciting. It’s also a weighty decision. But it’s not an absolute necessity until you’re sure you’re ready for that responsibility. Once you are, make a decision with wisdom and clarity.
For reflection: Buying a home can be a wise financial step or a costly misstep, depending on how and when you do it. Culture tells us to “go big or go home,” but stewardship calls us to go humbly and wisely. God isn’t impressed by square footage or granite countertops. What matters is whether our choices create room in our financial lives for margin, generosity, and planning for the future. How “top of mind” are these things when you are thinking about buying a house? Are you more focused on answering the “how much house can I afford” or the “how much house does God want me to own” question? Pray and ask God to speak to you concerning these things.
Verse: “By wisdom a house is built, and by understanding it is established; by knowledge the rooms are filled with all precious and pleasant riches” (Proverbs 24:3–4, ESV).