How Do People Afford Those Huge Mcmansions??

Wow, such bitterness and jealousy here. To Anne L. - People who EARN $200,000 are paying $66,000 in federal taxes alone. How much more do you think the government is entitled to take of money they did not earn and certainly do not spend wisely?

Dang! Im gonna move there and buy a McMansion! There are houses on my street almost that much and they are far from Mansions. We still couldnt afford that though.
Clearly, they have good jobs.

Well, clearly they make enough money to "afford" them or they would not be able to live there. A lot of people are living off their credit card. Maybe they can pay for their $3000 mortgage payment, but everything else goes on credit. Who knows? WHO CARES!!! I would rather live in a smaller home that is upgraded than live in a large home that I have to stress out about financially. A lot of people try to show off and keep up with the "Jones'". I personally don't pay full price for anything. And we pay cash for EVERYTHING. If we can't, then we don't buy it, its as simple as that.

People afford them by having six figure jobs for a combined household income of at least $200,000 a year, from inheriting money or investing from the time that they are very young so they put away $20,000 a year from the time they get out of college and 10 years later, they have over $200,000 to put down on the home. They're not taking a $355K mortgage on a $355K home. Not everyone can afford a home like that but if you have a couple and they both make about $90,000 a year and they don't have any college debts to pay off, and saved beforehand for a sizeable down payment, it's certainly doable.

If they have a huge home, they make enough money to afford it. I don't get your question. Is it just to make people bash the wealthy?

It is none of my business how people afford what they have. I really don't care either.

People can afford big houses because they make big salaries. My husband went to a great college, got a great job, he's very smart and has made great investments. We don't live in a mini castle or a McMansion, but we do live in a large home with land and it's well deserved. Anne L your answer boggles my mind. We pay out of control taxes.

Education, good planning, self discipline, sacrifice, motivation, investing at the right opportunity, knowing your market, knowing your financials inside and out and when to make the right moves.

The economy is not that bad. We are in the manufacturing business and it is booming.

Hmmmm....mcmortgages? LOL

A few thoughts on these homes (And I know exactly the ones you're speaking of. Many are built to bare-bones specs, and shoddy workmanship.....people BUY NOW & figure they'll "upgrade" later. I can't tell you how many mcmansion families I know that are STILL planning to "finish that basement O. day"!

First of all, I wonder how they make the payments. And IF they make the payments AND manage to "live" a real life. I have never been nor will I ever be "house poor". Where's the fun in that? If I can't afford a comfortable life in which I can do things, go places, take a vacation a few times per year...something's "wrong".

Secondly, what a bank tells you that you can 'afford" per month and what you really CAN afford are often worlds apart. There's a HUGE gap. And yes--there are people out there who are foolish enough to listen to a mortgage guy. If I had listened to the bank 20 years ago when I (single woman) bought my first home, my diet would have consisted of mainly Alpo. I mortgaged HALF of what they approved me for and even so--many months things were VERY tight! 25% of your NET income is a reasonable amount to put aside for a mortgage. No more!

Thirdly, there are, apparently, people out there that "see" others and envy what they do not have. Logic goes out the window. They "gotta" have it....NOW. No O. will admit it, but it's often a case of "keeping up with the Jonses" clearly. In our area, you can get a basic home for 100K up to 350K. Different areas have different median prices for homes. Could I 'afford' the mortgage on a 350K house? Probably...with some lifestyle changes. But I'd rather keep my middle of the road paid off house rather than be a slave to the bank and a hamster on an exercise wheel.

Fourth, there are a lot of misconceptions out there. People say they're Ok with the payment b/c we get to deduct "all this interest" every year & it's better to never pay off your home. Ummmm.....OK. They can keep thinking that because they are making the banks very rich and themselves very poor.

ETA* I almost forgot my largest point! If I could afford a 500K house, I certainly wouldn't want to live in a subdivision with hundreds of other houses all around me! How do these people find their way home? Land, people! Land! LOL

I am currently looking for a larger house (mainly because I've run out of bedrooms in my current home with 4 kids). We are able to afford a larger, more expensive house because of my husband's bonuses and his frugal nature. His bonuses are basically "guaranteed" every year and are more than his salary. However, we spend, plan, save, and live on his salary alone. So, then his bonuses are just bonuses. So, we then have a large chunk of money to put down on a house (no pmi). We also don't have car loans, student loans, credit card debt, etc because that was already paid off with bonuses in years past.

They can't. That's why the housing bubble collapsed.

(Yes, obviously some people can. But the majority could not.)

Cheerful, above -- $150K a year is NOT rich. It is middle-class. And that is why people like me believe the RICH should be taxed more, because people like you, the middle-class, are paying enormous percentages of taxes.

They can afford them because the difference between the incomes of the wealthiest people and the poorest people in our society has been growing since the 1980s and it now is bigger than it has been in sixty years. Lots of people have gotten poorer and a few people have gotten much richer. It boggles my mind why people who earn more than $200,000 a year aren't expected to pay a reasonable amount of taxes--but that's another issue.

[After reading the responses, and my own note, I realize my last sentence was not called for. It wasn't meant to be a personal slam at anyone, but it could be taken that way and I apologize for that. Yes, the cost of living in different parts of the country is different and money doesn't go far in areas like DC. I do notice, however, that no one questioned my point about how much more unequally wealth is distributed in our society now, and I personally think that so much inequality is really unjust. Many people are working two minimum wage jobs and still not earning enough to have a decent standard of living--they're not dumb or lazy, either. How to fix that? I don't know. Anyway, I send peace to all.

In our case we work hard and make a lot of money. Just being honest. We spend frugally and save like crazy. We don't live beyond our means and have minimal debt (only my husband's school loans at the time we purchased our home and now the mortgage). With a healthy downpayment you avoid PMI as well as "big" mortgage payments.

We actually qualified for significantly "more home", but we didn't need it and didn't want to pay for the heating/cooling/upkeep. Unfortunately that's how the real estate market crashed... banks approved people for "max amounts" and that's what they spent.

Foolish.

$355K in MY area? You'll be lucky to get a condo or a VERY small town house...

McMansions in our area start at $1M and go up from there...

How do they afford it? Who knows! :) Some saved wisely...others - well, I've seen foreclosure signs on some of the McMansions - so obviously - they couldn't afford it....the ones that can afford it? have well paying jobs and great credit.....

While others borrow from Peter to pay Paul and live off their credit cards...

My GF and her husband have a 6K sq ft house, 5 bedrooms, 4.5 baths and it cost them $800K (right before the market went crazy 5 years ago and I guess you would call it a McMansion)....they both work and make over $150K each...some people can....

I think there are a few assumptions that we all often make. Some factors you might consider:
1. Who says they can really afford it? Many of those mcmansions are foreclosing in our area.
2. They might have family money.
3. They might be working like dogs to pay for it, not really enjoying the house because they are always at work.
3 Interest rates are very low right now. We just refinanced to about 3.5% (I don't remember the exact number, it might be lower. I know it isn't higher.). In 5 years since owning our house, we have knocked 15 years off the loan, primarily by refinancing to lower rates. You just never know. And, we've never paid PMI. That's a waste of money. If we can't afford the 20% down, we don't buy the house.
4. Our personal financial situation is what shapes our perspective. Not everyone has the same definition of "really ok money."
Having said all that, I often wonder the same thing. :)

I hate homes like this. My husband used to work for a home builder. The homes were 3 stories but still reasonable sized. He said that 90% of his customers never even used the third floor. Meaning that these people were paying to heat and cool space they didn't need and contributing to global warming for no reason. People in houses this large don't even need that space its just for show. I think if you have that kind of money you should be required to put solar panels on the roof to make your own electricity. At least that way your greed won't be my problem later. Sorry I know off topic but these houses really piss me off.

Because the economy isn't as bad as everyone is making it out to be. Our "economy" is really just perception. If you read that the economy is bad, then you stop spending. Pretty soon companies are downsizing and jobs are really being lost. This mostly affects middle and lower income people.

The rich just go on being rich and taking advantage of the "bad" economy. They can snap up houses cheaply and afford to hold on to them until the economy improves. They can expand their business cheaply.

Then when the market analysts decide that they want the economy to be good, they tell everyone it's improving.

That's a simplified version of course, but the rich do go on being rich. People always need doctors, lawyers, groceries, gas, clothing etc., even when the enconomy is bad.

The idea that the "rich" don't get taxed enough is false. At one point we made over $150k a year and we got taxed heavily. And that's not being "rich" by any means!!!!! The more we made, the higher tax bracket we were in. It actually was pretty horrible because the harder we worked, the more the government took. What's the point?

People who own their own businesses can mess with taxes by taking deductions for a lot of things. Then the amount of money you report to the IRS is lower. THAT'S how they do it. If you try to do it the corporate ladder way, you get hit with heavy taxes--thanks to the people who think the rich should be taxed more. Pretty much you've just made your own ceiling since the harder you work, the more they take. You have to be a business owner to make it work.

/soapbox

Credit! Some people are still buying more than they can afford knowing that they can always default on their commitment to pay if it gets to be a hardship.
We like to sleep at night, so my family of 5 lives in a 3 bedroom house that is almost 10 yrs old and has been paid in full for more than 2 yrs. There's no substitute for peace of mind of living within our means. Being in debt up to your eyeballs comes with it's own stress.

Sorry Anne L. You're response is ignorant! $200K is nothing these days and as JC said it is $66K in taxes plus. If you are a small business owner making that......You have to pay the rent in your office...staff salaries and benefits...business taxes and any other overhead....then you move onto what you have to pay in taxes personally...Hello...some people are so clueless. How much more do you think people should pay????? Don't you think that these people have paid enough? Doesn't seem like they'd have a lot of play money left over.... Mind you I am not in a MCMansion either..Yes I wonder how some can afford it...But I bet some who do live paycheck to paycheck. If you want that kind of home then you need to figure it out. If you work hard then you should be rewarded for your hard work. Like I've said before you deserve what you work for and nothing else.

They have big salaries.
Saved, saved, saved.
Some of them invested well.
Inheritance.
Owned previous homes and sold them for higher than they paid.

Here in Austin we have "Dellionaires".. These are the people that worked for Dell Computer company when it was Michael Dell building computers in his Dorm room.. Then in a small office,etc.. They invested or they worked for shares of the original company.. Now that it is such a huge company, these people are worth fortunes for generations.

Remember these are engineers, they are programers.. Corporate Sles people. They worked way more than 40 hours a week for DECADES. this was their life. Their spouses and children did not get to see them as often as the people that work 9-5 or work 40 or 50 hour weeks.. It is a trade off.

And yes, the property taxes, the monthly upkeep, the landscaping, the pool maintenance, the constant coming and going and cost of the help it takes to maintain these homes is mind boggling. Then factor in Electricity, gas, home insurance, security systems.. it goes on and on.

I remember last Christmas we were setting up and decorating a home for the holidays and it was so hot inside the house. The woman came in and apologized saying now that her husband was now retired, he was not allowing the air conditioning to be on all of the time.. The problem was that in this over 10,000 sq ft home.. NONE of the windows could be opened!!!! Only doors to the patios and balconies!

So there is the good and bad to any life..

My FIL used to say. it's not how much you make, but how much you save.. I tend to think in some cases, people actually do save and have for many years prior to purchasing a house.. That isn't to say that some people aren't in over their heads. My in-laws came here with literally nothing and worked hard and moreover, saved hard..... hence, they have a nice house and a nice retirement. In many cases, it is a matter of planning and some have planned to live in a nice big home. My son who is only nine always talks about the places he will live and how he will plan out his kitchen (he likes to cook) therefore, I nurture his ideas because I do think nowadays, you have to start young.. help your kids plan now... even if it means just putting 20 dollars in their savings each month... plan plan plan... but it's important to do something..

You guys, be nice!

lol Melissa J and Amber C, I love what you said.

Here in Houston its easy to get a McMansion if you moved in from another state or if one of the many oil companies transferred you in from overseas.

These are regular joes who just happen to get lucky b/c of the area they sold their previous home or who they work for.

Homeowners in Houston are screwed if we move north, to say the least. It looks like if we sold our home it won't buy us a thing if we moved.

I think it's big salaries, saving and being fiscally conservative. There may be inheritances in there as well, although I'm betting not everyone has that in those homes. Anyhow, I'm with pp in saying that many people overspent in the past, which led to the present mortgage crisis.

They are showy and over the top and make me want to puke. They are like 3 million bucks. I don't care how much money you make, you don't need a house that big unless you are running a orphanage.

Ok so I am not answering your question - sore spot for me :)

Sadly, I think a lot of people really can't afford them or can barely afford them but were able to get loans anyway. And now with this economy, they have lost their job and can't afford to maintain the house. Sometimes foreclosing due to not being able to sell.

The real estate boom (if you want to call it that - more like the boom before the fall) contributed to people wanting more than they could afford. It's pretty sad.

Many people don't really afford them. Or they sacrifice elsewhere. And some of it is location, location, location. Here, you wouldn't have a McMansion for $300K. But back home, $300K could get you a really nice house, so if we sold here, we could move there and live in a big house...but it would mean a horrible commute for my DH. There are people who live in PA and work in DC or live in DE and work in Philly. I'm not willing to do that.

a lot of my friends got large gifted down payments from their parents. These 'gifts' were any where from $20,000 & up.

A good friend of mine bought a home in California for $250,000. They sold it during the housing bubble for $500,000. They moved to the burbs of Chicago & bought a home comparable to the one in Cali for $250,000. They essentially paid cash for the new house & paid off their mortgage in Cali for $250,000.

I also have been in the mortgage business for over 20 years & I can say that there are a lot of inheritance money & gifted money. I did a closing for a girl that was 24 yrs old & her dad paid cash for a $1.2 million dollar condo in downtown Chicago. It wasn't all that uncommon for people to pay cash or bring in a huge down payment for homes. Of course there are the majority that take out loans too. But seeing the diversity of the past 20 years has been real neat.

We live pretty frugal & live in an average home & don't have anything luxurious & my husband makes good money & I am a SAHM but it amazes me how people need to live up to other peoples standards, if we don't have the money we don't buy it.

Ummm...they earn more money than you. Doctors, lawyers, CEOs, etc.

We don't have a McMansion ourselves, but we have a nice, moderately-sized home that we had built new 2 years ago. They had dropped the prices on the remaining lots in the subdivision as an incentive and we also lucked out by getting a interest rate of only 4.6%. So our monthly payments are quite reasonable. By putting down $40K as a down payment (20%), our mortgage is actually $160K. It also helps that my credit score is practically perfect.

Keep in mind too that in some cases all their money goes toward their mortgage payments and they may not have as much left over for other things. And it depends on what area of the country you are in - $355K will get you a really nice house on a lake out here (Michigan), but in some areas (east coast and California, major metropolitan cities) it might get you a tiny condo/apartment.

We don't own a mcmansion but we live in a very expensive area where normal sized houses are $350! My mom lives in Houston and tells me we could afford a mcmansion there - that cracks me up. Our first house was $180K and we had to borrow some money from my FIL for the downpayment. We worked hard to pay a huge amount of that house off early. Then when we moved it sold for $260. Then we bought a house for $280 which had an apartment in the downstairs which we rented out. We lived there a while and paid off a lot of that house (because of the apartment). Then we bought a house for $350 and it sold for $360. Then we bought our current house for $370. We had a ton of money to put down so we are paying a nice amount each month....not too much. I am a SAHM and my hubby is a physicist. We just had amazing good luck with houses in life. We love this current house - it is very nice and definitely bigger than any of our previous houses.

In this area, anything you can get for $355k is not a huge mansion.
When we first moved here we went to a Home-a-rama show which was showcasing high end housing.
Price range started at $1 million and topped out at $3.5 million.
The most expensive one had servants quarters, a full sized in home theater which could seat 30 people, a game room which had 6 or more flat screen tvs mounted on all the walls so you could watch all the games while playing billiards, an exercise room, multiple washers, dryers, dishwashers, refrigerators, climate controlled walk in wine pantries, multi-tiered pools, a water fall that fell into the pool from the 3rd floor, out door patio cooking stations, fire pits and a 4 car garage (with it's own oil changing pit).
This house was clearly designed for entertaining.

If you are an executive CEO (or a movie or sports star) and you are pulling in $15 million a year salary, not only do you own a home like this - you own one on each coast as well as something north and south for summer and winter and maybe one as well in Italy or France.

We're in New England, too, though relatively cheaper Rhode Island, and I have no idea, other than by being tonnes of debt! We live in a small mid-century ranch and honestly, I love having a small house. It's so much easier to keep up with, it forces us to get rid of junk we don't need, I don't need to worry about not hearing my kid if she wakes up or her falling down stairs, and we'll be able to stay there even as we age, without downsizing. Sure, it would be nice to have bigger closets or higher ceilings, but no house is perfect. Mine is pretty close, though.