This post was inspired by Daisy’s post on Out of Control Transportation Costs, and is a follow up to the post I wrote yesterday where I wondered how much of your house you actually use. Housing costs can be one of the biggest line items in any budget. While I don’t feel our housing costs are out of control, I will admit to being a little boggled at the value of our house and the size of our mortgages – I never, ever thought I’d own a house with a price over $400,000, and our monthly mortgage (PIT) is well over $2,000 per month. Let’s face it – PIT is just the tip of the housing cost iceberg, too.

So how do our monthly housing costs break down?

These are the basic costs, add to that an amount for maintenance (we have a new house, so other than minor things like furnace filters and light bulbs, we’ve had no issues), or improvements (still need to build a deck, we’d like to improve the yard). As well, there is yard upkeep, which requires a lawnmower and other tools; we live in Canada which requires a snowblower – yes, it is required, I’ve tried to shovel my way out of a snow drift four feet high by eight feet wide by ten feet long. It’s not a pretty sight.

So we need to budget well over $3,000 per month for our basic shelter costs. That is a lot of cash. In the long run, our decision to live where we do has a high opportunity cost. The house we were living in 3 years ago before we decided to move was smaller, but had a correspondingly smaller mortgage. Our housing costs there were lower, but the house was also older and needed significant repairs.

The utilities were so much higher due to a new furnace and air conditioner that we financed through our utility company; these were necessary as our furnace completely failed one October. You cannot survive a Canadian winter without a furnace (our AC had been down for almost two summers already; we bundled the two together to save some money). So we are paying over $800 per month more now – but we were facing over $50,000 worth of repairs at our old place, so our maintenance costs would have been significantly higher.

The main issue is this – the $3,000 we spend on housing is money we are not using for other things, like funding our retirement, building up an emergency fund, or even consumer spending such as travel, clothes, and shoes. This is our opportunity cost – we’ve decided it’s worth it to us, because we love our house (we really put a lot of thought into it, and it is as close to our dream home as we could get). We also spend a lot of time in our home, making it logical for us to put money into what matters most to us. We also live in a pretty good school district; which benefits our children. Bruce is less than 2 miles from work, a major convenience (and a factor in our decision to build where we did).

But if we were paying less for the luxury of living here, how much closer would we be to financial independence? How much more freedom would we have? And do we still feel it’s worth it? As I said yesterday, right now, I do feel it’s worth the cost to live where we do. But once the kids are gone, we’ll be moving on to something smaller.