Shark Tank’s Kevin O’Leary reveals the one mortgage rule homebuyers ignore and pay for

Shark Tank fame Canadian billionaire and investor Kevin O’Leary is sounding an alarm for anyone planning to buy a home against the "biggest money trap."

In a recent Instagram post, the television personality warned that the biggest financial mistake homebuyers make isn’t high mortgage rates; it’s taking on a house far bigger than their budget can truly support.

"If your mortgage eats up more than a third of your income, you’re setting yourself up for long-term financial stress."

Here's what the Shark Tank investor said

In his viral post, O’Leary wrote:

“The biggest money trap people fall into without noticing? Buying a house that’s too big. Your mortgage should be no more than a third of your income. People stretch to 50–60% and then wonder why they're suffocating. Get a smaller house. Upgrade later.”

The Canadian billionaire emphasized that mortgage payments should not exceed 30% of after-tax income.

O’Leary insists the golden rule is simple: "Your mortgage must stay below 30% of your after-tax income." Anything beyond that, he warns, leaves no room to breathe financially.

This warning comes at a time when the housing market is tougher for homebuyers and with mortgage rates remaining high, O’Leary believes buyers must reset their expectations, as nearly half of U.S. renter households already spend more than 30% of their income on housing.

In August, he said that anyone waiting for the interest rates to fall below 5% was “dreaming,” due to America’s strong economic performance and AI-driven productivity.

According to O’Leary, the risk lies in overleveraging market cycles and rates based on emotion rather than financial reality argues that many people buy houses on mortgage payments, consuming 50% to 60% of their income, leading to financial suffocation.

He said:

What's the biggest money trap people fall into without noticing? Very simple. They buy a house that's too big for them. You really have to make sure that whatever mortgage you get is no more than a third of your income. No more than a third. People go up to 50–60 percent of their income. They buy a house that's too big. Get a smaller house. That's the whole key, and then as you can afford it, you can upgrade.

O’Leary pointed out that mortgage costs are just the start. Many buyers overlook the additional 10-15% of money they will need for property taxes, utility bills, home insurance, upkeep and repairs, and unexpected emergencies.

He said that these ongoing costs can "suffocate" families who have already maxed out their mortgage. Even if the home seems like a good buy on paper, the lack of cash becomes a big issue.

A large house with high bills, he warns, can fast change from a help into a load. Instead of seeking the ideal dream home at once, O’Leary suggests a step-by-step, money-wise way:

1. Begin with a house that you can easily afford, typically 1,500 to 2,500 sq. ft. in size, for your family.
2. Focus on paying off the loan and growing value.
3. Update later when your finances grow stronger.

Stay tuned for more updates.