Warren Buffett's Berkshire Hathaway Reveals Key Mortgage Strategy

American homeowners planning for retirement often spend a lot of time and energy balancing the desire to save and invest with the need to pay their bills.

Warren Buffett's Berkshire Hathaway HomeServices (BHHS) believes in a simple rule people making mortgage payments can follow to help them live a rewarding financial lifestyle that allows for both. 

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For many people, considering buying a home — or making monthly mortgage payments on homes in which they already live — involves managing the financial tension between the size of that expense (and other monthly costs) with the necessity of setting aside enough money to prepare for the future. 

Retirement concerns are plentiful. Chief among them is the fear that longevity trends are forcing people to increasingly worry they will outlive their savings.

Related: Dave Ramsey warns Americans on a homebuying mistake to avoid now

It is generally recognized that Social Security monthly payments alone are of insufficient amounts upon which to live comfortably in retirement. Health care expenses such as Medicare premiums and prescription drug costs can be a financial burden for retired people. 

While saving for those future costs, many potential and current homeowners are making car payments, supporting their families, saving for college and paying for groceries. Many are trying to make some sense out of how much money they should be spending on which costs — and how much they should be saving and investing.

Berkshire Hathaway HomeSellers suggests Americans follow a simple rule on housing costs as a safeguard against becoming financially overextended. 

A couple celebrates the purchase of a new house. Warren Buffett's Berkshire Hathaway HomeSellers explains important home-buying steps people can take to avoid becoming house-poor.

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Warren Buffett's Berkshire Hathaway HomeSellers explains being 'house-poor'

The residential real estate services company clarifies its most basic recommended distribution of home expenses.

BHHS cites the U.S. Department of Housing and Urban Development (HUD) definition of affordable housing, explaining that a homeowner should pay no more than 30% of their gross income on housing costs.

This includes expenses such as mortgage principle and interest, property taxes, home insurance premiums and utilities. BHHS also mentions that, in reality, home ownership can cost even more when homeowner association (HOA) fees, maintenance and repairs are factored in.

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Specifically, BHHS clarifies a few steps homeowners can take to achieve this financial formula to avoid becoming what it calls "house-poor."

First, a potential home purchaser should be sure to buy below their means.

"Your lender will qualify you for the maximum you can afford, so be wise and buy a less expensive, smaller home," BHHS advises. "Use the difference for savings and investments. You can always move later."

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Berkshire Hathaway defines long-term home ownership

The real estate company emphasizes the reality that housing costs tend to rise consistently over time and need to be carefully planned for. In particular, it discusses how this fact affects taxes.

"Property taxes are based on sales prices, so you’ll only pay the seller’s rate until the next assessment which will be much higher next year," BHHS wrote.

Berkshire Hathaway HomeSellers encourages home buyers and homeowners to plan for the long term. It defines specifically what it believes that to mean, and then offers a recommendation.

"It takes time to build equity in real estate," BHHS wrote. "When you buy a home, plan to live there for at least seven years, then rent it out."

Berkshire Hathaway HomeServices says it is comprised of almost 50,000 real estate professionals and more than 1,500 offices across North America, the Caribbean, Europe and Asia. 

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