Kevin O’Leary Says the ‘Biggest Money Trap’ Is Getting the Wrong Type of Mortgage

Mr. Wonderful has some advice for prospective homebuyers looking to settle down in their next place. 

Buying a home is arguably the biggest financial decision of a person’s life, and there are so many money matters to consider, even before making an offer on a place. 

"Shark Tank" star and entrepreneur Kevin O’Leary weighed in on the biggest mistake homebuyers make when it comes to buying a home, and it has everything to do with the kind of mortgage you take out. 

The best mortgage for buying a home

“The biggest money trap people fall into without noticing? Buying a house that’s too big,” posed O’Leary on his X account this week. 

Overextending with a house that's too big has plenty of consequences when it comes to a homeowner's budget. More house means higher property taxes, insurance premiums, and utility costs. But even before any of that comes into play, a bigger house ultimately comes at a higher cost, meaning a larger mortgage you’ll need to take out. 

O’Leary calls these kinds of deals “suffocating.”

“Your mortgage should be no more than a third of your income,” he insists, pointing out that people who stretch to 50% to 60% are the ones who likely find themselves drowning.

The mortgage math

The average-priced home as of November 2025 was $419,000. Assuming a prospective homeowner has 20% of the purchase price saved for a down payment, and following O’Leary’s rule that the mortgage should be no more than a third of their income, they need to be making at least $80,000 a year to afford the home with a 6.3% mortgage. If they made less than that, they likely wouldn’t have enough money to cover other housing costs.

To put this in context for a specific city, let’s say you buy a home in Atlanta. The current median-priced home there is $410,000. A 20% down payment would be $82,000, leaving a mortgage of $328,000. Following O’Leary’s rule, a buyer would need to be making at least $73,600 a year to comfortably manage the mortgage.

After federal and Georgia state taxes, that salary translates to a take-home pay between $4,300 and $4,700 a month, depending on the pay schedule. Let’s assume this prospective homeowner brings home $4,700 per month. The monthly mortgage payment (principal and interest) would be $2,044, leaving $2,656 per month to cover property taxes, homeowners insurance, HOA dues, utilities, groceries, retirement savings, and other expenses such as car payments or student loans.

O'Leary's advice? Think small

To make sure you don’t end up with an underwater mortgage, O’Leary recommends starting out with a smaller place than you’ll need for now. 

“Get a smaller house,” he suggests, as you can always “upgrade later.”

Of course, in this housing market, that’s easier said than done. 

While inventory continued to climb for the 25th straight month in November 2025 (+12.6% year over year), growth is slowing and new-home construction is still not where it should be. 

On top of that, a traditional detached two-bedroom single-family house—often called “a starter home”—costs upward of $1 million in a majority of states today.

Thankfully, the Realtor.com forecast for the housing market in 2026 is looking to be more balanced, with housing affordability improving as incomes outpace inflation. Maybe then prospective homebuyers can put O'Leary's advice to good use.