Should I Spend All My Savings on A House? I Did – Here’s What I Learned

Houses are expensive. Even if you’re buying with credit, you must provide a substantial amount upfront for the downpayment, closing costs, and other miscellaneous fees. 

As you watch prices rise, you might wonder, “Should I spend all my savings on a house?”

It might be the only way to afford a home, but is it a good idea?

Should I Spend All My Savings on a House?

I once spent all my savings on a house. I paid $55k for a fixer-upper in a rural town well past its prime. 

If you’re ready to drop all your cash on a house just to get into real estate – read this first!

Before spending it all on a house, you must define what that means and consider the financial implications. 

Define Savings

I spent all my savings on a house. 

But when I say savings, I literally mean only cash savings. I did not spend all my money on a house, nor did I cash out any investments to buy. 

I spent all my cash reserves to buy a house. 

Even at that, it was still a scary decision. I had over a year’s worth of living expenses saved up, and afterward, I only had a starter emergency fund. 

It was a scary decision. 

When Is Spending All Your Savings on a House a Good Idea?

Spending all my savings on a house worked well for my situation. 

I bought the home in cash, so I was mortgage-free. Taxes and insurance cost less than $300 a month, making my overall monthly expenses minimal. 

It would be easy for me to rebuild my savings with such a low cost of living.

Or so I thought. 

I didn’t know gas heating would cost nearly $1,000 a month in the winter. I’m thankful I didn’t have a mortgage because there’s no way I would have been able to afford both. Thankfully, I could put money aside in the summer to help mitigate the cost and still put money in savings, but that was a massive, unexpected blow to my master plan. 

I also didn’t consider all the repair bills that would pile up with a fixer-upper. I accounted for some of them, but I didn’t know the extent of the damage. In the end, I spent more money fixing the house than it was worth. 

But overall, even with those financial pitfalls, it was a good idea. 

A Place To Live

Buying the house gave me and my cats a place to live for three years. At the time, I had abysmal credit due to a cosigning mistake, and no lender would underwrite a mortgage. 

I needed a house because nobody would rent to someone with four cats and two dogs, but I couldn’t get a mortgage. 

My only option was buying a fixer and hoping it would work out. 

It did. 

The house had its share of problems, but it gave me time to fix my credit and build back some of my savings. I sold it for about the same amount as I paid, but after all the repair work I put into it, I lost money. 

But that’s okay. I had a place to live for a few years when I desperately needed it, making it 100% worthwhile. 

When is Spending All Your Money on a House a Bad Idea?

Spending all your money on a house isn’t always a good idea. Sometimes, it’s neither good nor bad, but the only option available. 

But sometimes, it’s an awful decision, even if it’s the only play you have. 

These factors would have made spending all my savings on a house a horrible idea. 

Having a Mortgage

Spending all your savings on a house and still being saddled with a mortgage is a bad idea. Spending all the cash reserves and then having a mortgage to cover would stretch even the best budgeters far too thin. 

Press the pause button if you’re considering spending all your savings on a downpayment. Build a more substantial emergency fund before emptying your accounts. 

Explore programs that don’t require hefty down payments. FHA loans only require 2.5% down, which is far easier to find than the 20% needed for a conventional loan.  You’ll have to pay primary mortgage insurance (PMI), but that might be better in the long run to protect your savings. 

Some states also have special loan programs for first-time home buyers, veterans, and other unique cases. Speak to a lender about the loan options you qualify for, and you may not have to spend so much up front. 

Cashing Out Investments

Do not cash out your retirement savings to buy a house. It’s stealing from your future self. 

Your retirement accounts have years to grow. Cashing out would destroy the potential growth, jeopardizing your entire financial security

It’s not worth it. 

However, there is something you can do. Many retirement plans allow you to take out loans for real estate. If, and only if, you absolutely need that money for the house, it’s okay to explore the option. These programs don’t let you fully cash out, and they make you pay the loan you took out with interest. 

I used this program when I bought my first home. I borrowed $10K for closing costs and the downpayment. It took me six years to repay it, but my retirement account still thrives. 

Should YOU Spend All YOUR Savings on a House?

I spent all my cash savings on a house, which worked out for me. 

Does that mean you should do it?

I can’t give you a solid answer. First, I’m not a financial advisor. I’m just someone who’s been there. 

But second and more importantly, different things work for different people. Some don’t care about having a robust emergency fund, while others stress out if they don’t have a year’s worth of living expenses on hand. 

Before spending all your money on a house, consider your risk tolerance and the alternatives. Having money in the bank feels good but doesn’t beat inflation. Real estate investment is a giant risk, but it could pay off. 

Your other options may be reasonable or horrific. Maybe you have to rent another year to save more money, but perhaps you’re getting kicked out and can’t find someplace that will take your beloved dog. Cashing out your savings to keep your best friend might seem like the best option. 

The Decision is Yours

Spending all your money on a house is a big decision with massive consequences in both directions. It has pros and cons, which differ drastically depending on your situation. 

I did it, and although I lost money in the long run, I don’t regret it. Living in the house was a great experience, providing security for myself and my loved ones. 

I’d do it again if I had to, but I’d also avoid it if I had any other options. 

What will you do?

4 thoughts on “Should I Spend All My Savings on A House? I Did – Here’s What I Learned”

  1. Sorry, but no. It would have been better to have waited until you could do it and still have a six month emergency fund. There was no rush, there is an endless supply of houses so if you had waited you’d have gotten just as good a deal. It wasn’t stupid at all, but you could have made a wiser choice. But you are still in awesome shape. I’d have never said a thing, but you asked!

    • Thanks for the honesty! Yeah, it may have been smarted to wait until we had a bit more money saved, but this house was a great deal and I missed my pets that have been staying in Georgia. I wanted to buy quickly so I could get them back (and to stop commuting an hour each way to work – the money I”m saving on gas now that I’ve moved has been amazing!)

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