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5 Reasons Why Home Ownership Might Not Be For You (Frugal Friday)

The following is a guest post from Jen of Happy Little Homemaker.

My husband & I are in the midst of trying to sell our home. In Michigan. We’ve wanted to sell it for years…and we only built it six years ago!  Before we built, we were in the cheapest apartments in town.  It wasn’t the greatest neighborhood (nothing like a big city, but annoying nonetheless)– the apartment was small and dark with a tub that wasn’t deep enough to cover my thighs. We couldn’t WAIT to get out.

Now we can’t wait to sell! Over the last 6 years, we have learned that home ownership isn’t (and probably shouldn’t be) for everyone.

Do you have a nest egg?

Most importantly, you need to have a nest egg before you purchase a home. Dave Ramsey says that you should be debt free and have 3-6 months of living expenses before you start saving to buy a home. You should put down at least 20% and the remainder shouldn’t be more than 25% of your take home pay on a 15-year mortgage. Do you have $50,000 in the bank?  If not, the timing isn’t right.

What is your 10 year plan?

When we were in college, we didn’t know what we wanted to do or where we were going to be in 10 years.   So why buy a piece of property in a place you might not be in?   Do you have kids yet? Will you both work when you have kids?   These are all factors that might lead you to decide that owning a home might not fit into your long term plans.

What do you do for a living?

I read an article recently that the average person in my generation changes jobs every 3.5 years. I have listened to Dave Ramsey talk to people who have a house, move for a better employment opportunity, and are stuck with a house in a state they no longer live in.  Worse yet, some people repeat that mistake and have several houses they can’t get rid of.  Who wants to miss out on a great opportunity because you are chained to a house?.

Elderly Family/Parent’s Illness

Many fall into the “sandwich” generation; those people who are taking on the monumental task of caring for their burgeoning family, as well as their aging parents.  People frequently move back to take care of their parents or bring mom or dad to live with them.   If you do not own a house, you can go to them, or get a different place, as circumstances dictate.

Travel

It truly IS a small world and it’s no longer a once in a lifetime event to travel halfway around the world.  What if God calls you to mission work on other continents?  What if you decide to move to Italy like Rachel @ Small Notebook?  It’s also not out of the question to go somewhere to visit and love it so much you would like to move there.  Why saddle yourself down to a house if that is an option you are open to or actively looking for?

This world is full of options and possibilities and it’s impossible to know what your life will look like. I try to be able to embrace change and adventure by keeping my life as simple and flexible as possible so when the opportunity comes up, I can say “YES!”.

What would you like to be able to say “YES!” to if the opportunity arose?

Jen writes about simple living and the nitty gritty details of embracing her vocation at Happy Little Homemaker.  She has also started a new product review blog (Happy Homemaker Reviews) focusing on ways to save your time, money and sanity!  Jen is a proud wife and mother to two little girls…so far.

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Comments

  1. anymouse says:

    My husband and I just paid off my car. We still owe on a second vehicle and will likely be paying that off in about 3 years (using the debt snowball)….granted I think it’s a wonderfully idealistic idea to be able to have 20% down on a house (plus a 6 month emergency fund) but if my family were to have waited until we had 20% for a down payment we would have had to wait an additional 10 years before we bought our house. Meanwhile we would be throwing our money away on rent. Where we currently live our mortgage is the same payment as what we would have to pay for rent. I agree that if there is a chance that you will only be in one place for a few years then renting would be the obvious choice but if you plan to stay put then your home is an investment and will gain equity over time…even if that equity comes from paying down the principal and not by the market rebounding.

    • Jessica Fisher says:

      @anymouse, well, I don’t know that every situation is “throwing away money on rent.” Many/most people aren’t paying down principal. They are “throwing away money on interest.” And if they aren’t staying in the house for 15 or 30 years to see the house paid off and they don’t earn any equity in the process, it’s not much different.

    • @anymouse,
      I have also heard that renting is “throwing away your money.” That’s actually not true in many cases. My husband and I currently rent and looked into buying a home. We pay $650/month for rent and our utilities average less than $100/month. (We’re in a town home surrounded on 3 sides by other town homes which results in HUGE savings in heating costs.) So we’re paying $750/month for rent and utilities.
      We were looking at a very modest $130K home. It is true that the actual loan payment would be less than we pay in rent. However, we would have the following costs monthly:
      $50 homeowners insurance
      $310 property tax
      $100 estimated basic maintenance
      $300 average utilities (trash, electric, gas, actual averages from this house)
      So, that’s a total of $760/month (more than our rent plus utilities currently) BEFORE we even get to paying a cent on the actual mortgage which is mostly interest the first few years. That’s also assuming only some pretty basic maintenance and no upgrades (which would definitely be a temptation). Of course, the house is a little bigger/better than what we currently live in. If we knew we’d live here for 10 or more years, it still might make sense because both the home will appreciate and our rent will increase.

      • @Laura Jane,

        We have noticed the same thing. Another thing that is a big chunk that we didn’t anticipate was the need to keep up our lawn (mower, fertilizer, grass seed, watering expense in summer) and landscaping to not bring down everyone’s property values (we live in the city). Plus other things like snowblowing, leaf blowers/raking, the need for an official driveway (city code). There are so many more expenses than we realized!

        Thanks for the comments!

    • @anymouse, We are going to have soon short sale/foreclose on a house for a lot of reasons that aren’t worth going in to. Anyhoo… keep in mind that even if your rent/mortgage are the same other costs of owning a home are much more expensive. Your utilites will go up vs. an apartment (not only do you have a bigger space to heat/cool you’ll be adding utilites–do you pay water now? how about sewer? trash?) Also, you will add homeowners insurance, which is good for almost nothing except extreme disaster. Also, things break, all the time. Owning a house means living with the small breaks and shelling out big time for the big ones (like $800 last summer for a new hot water heater, and living with a drip in the roof in the bathroom.)

      If you can’t SAVE money for a significant down payment (like 150/200 a month) while living in an apartment, you can’t afford to live in a house. It will just fall apart around you and be a millstone around your neck if you have a better opportunity elsewhere.

      • @Denise, and I should have added these are all lessons we have learned by sad experience. I know that no one could tell us anything about home ownership. I hope you find a situation that makes your family happy and peaceful!

  2. I live in Michigan too, and I have to say there are times I wish we didn’t have a house to tie us down. But it’s one of those things that people just do without thinking because they’re supposed to.

    • Jessica Fisher says:

      @Wendy (The Local Cook), I’ve totally been challenged by that idea over the last few years. I love owning a home, but we’ve rented now for three years and continue to do so.

      Even though property prices have gone down in CA, they still haven’t hit the bottom. So we’re waiting. In the meantime, we’re able to save because we found a great deal on rent, a difference of about $1000 a month compared to paying a mortgage on the same house.

    • @Wendy (The Local Cook), Or because everyone tells you it’s what you need to do :).

  3. I don’t agree with having $50K in the bank before buying a house. I think that is way beyond what many people would be able to achieve. Maybe that part needs more explanation. I do agree about being debt-free.

    We haven’t been impacted as badly by the recession by other people. We’re paying our bills and saving money. However, we’re now upside down in our car loan because of GM. We bought a new Saturn for my husband as a commuter car. We paid over $20K; 2 years later, the car is worth $6K, and we’re only halfway through the loan payment. UGH!

    • Jessica Fisher says:

      @Barb @ A Life in Balance, I think what Jen was referring to was an emergency fund. Most recommendations that I’ve heard from $ experts and coaches is to have 6 months to a year of expenses in the bank. That way if you lose your job there’s a cushion between you and losing your house.

      We never did this when we bought our two houses and it was one of the biggest stresses ever. We never missed a mortgage payment, but the stress was always there.

      I think it’s pretty common that people put everything they have into the down payment. But, they can lose everything they have when the economy dives.

      • @Jessica Fisher, I think I sounded cranky when I wrote my comment this morning!

        It can be a fine line at times. Yes, one could put a huge down payment down, but what happens if the economy goes bad?

        I agree with Dawn about renting and saving for a larger down payment or at least a nest egg for when we did have a house. My dh and I landed on our feet, but we could have lived much more frugally before we bought our house and had more children.

        I also agree with the other comments about people needing make the best decisions for their family. Renting and owning are not the right fit for everyone. I think the key is making sure that one’s decisions and values are in alignment.

        • @Barb @ A Life in Balance, the $50,000 was part emergency fund and part down payment. I guess I should have explained that better. My thinking is that you need to have a good emergency fund AND a down payment before you buy. It was so stressful when we didn’t have that. Had any one thing happened before we had the EF, we would have lost the house.

    • @Barb @ A Life in Balance, I read it as having an emergency fund and at least 20% down on a home is where the $50,000 was coming from. I wish we would have rented longer and saved more before we purchased our home.

    • @Barb @ A Life in Balance, @Jessica was right on. My $50,000 in the bank was 1/2 emergency fund and 1/2 down payment. We have an emergency fund of $25,000 because we are self-employed and really need to err on the 6 month side for just essentials — rent, gas, food, insurance (health & life), and taxes. And with this economy, being self-employed we’ve had to dip into it SEVERAL times. If we didn’t have it, we would have lost our house more than once.

  4. I suppose a large part of Jen’s reasons are based on the possibility of a future move. If you plan to move, buying a house rarely makes sense, and Jen’s suggestions make sense.

    If, however, you are committed to living in a certain place, the whole discussion changes.

    In our area at least, paying for a house is not much more than renting one. In that case it makes sense to buy.

    What made us buy a house was that we wanted our children out of the city and in the country. We were buying a lifestyle as much as a house, and have been blessed with a dream location for the children to grow up.

    So, while Jen’s ideas may apply to some, they do not apply to everyone. The important point is to think things through carefully before making a decision, as Jen suggests.

    Blessings,

    Annie Kate

    • Jessica Fisher says:

      @Annie Kate, I think you’re right — some of those points depend. But, I think even people who are committed to a certain locale still move within that locale on a fairly regular basis. Where we lived in Kansas, the average was that people moved every 3 to 5 years within the county.

      I don’t think that the whole discussion changes, though. The emergency fund point holds true wherever you are. If you lose your job, you want to be able to stay in that place without losing your home. And many people buy without any cushion at all.

  5. I agree. I wish that we didn’t own this home. My FIL, pushed my hubby into it before we got were married. He kept saying “you will be able to afford it” come to find out the house is 75% of his take home pay. Oh and to top things off 60% of the homes in our neighborhood are in foreclosure. One big fat mistake that we will never make again.

  6. I agree with Annie Kate.

    Where we live, our house payment is cheaper than renting. We live in the country, right outside of the capital city.
    We have an amazing church and awesome homeschool opportunities, so we have no reason to consider moving.

    For some, it is cheaper to buy and you get to deduct a huge chunk of change on your tax return.

    As has already been said, you need to weigh all of your options, looking at pros and cons of each.

    • @Cindi,in some places it is cheaper to buy than rent, bit I don’t think that’s typical. At least it isn’t where I live :). How cool would it be to have the house paid off & get a big deduction for donating $10,000 instead of paying $10,000 in interest?

  7. I am sharing my sweet Almond Butter Truffles. Thank you for hosting.

  8. This is a fantastic article. My husband and I bought our house 7 years ago. I was fresh into my new career and hubs just started his. We had no idea what the world held for us but felt very pressure to buy a new house because at that time the interest rates were “at an all time low”. So we did with no money down and no savings. Well having the burden of a house was a lot when first starting out. If I could go back in time I would have waited till we had money to put down and a huge chunk in savings.

  9. Great article!

    We’ve owned two houses so far (and both at the same time for about a year and a half– not a situation I *ever* want to repeat!) and I can agree with all of these points. As for the $50K, I think that is a good plan although the exact number would probably vary from region to region and family to family. Remember you can’t “call the landlord” when the water heater breaks, the basement floods, or when the gutters need to be replaced. (All of those have happened to us!) You want to be able to make a decent enough down payment to avoid PMI (which is basically throwing money down the toilet) and then still have a home maintenance fund, as well as the 3-6 months of living expenses.

  10. $50,000 in the bank? That’s a tad out there for me. If that was a case we would never make it to home ownership. Our plan is to buy land. Then gradually build on that land.

    • Jessica Fisher says:

      I think that number was tagged as an emergency fund. For many people that might be a year’s income, though six months is a good bottom line number. And seeing as a lot of people are unemployed for at least that long, it’s really wise.

      Good luck with the land purchase. That would be my dream.

  11. Theresa says:

    I am sick of hearing people quote Dave Ramsey. Sometimes, a little common sense is needed. What will the cult of Ramsey do if he ever declares bankruptcy again…….there is a quote”never, never pin your faith in one human, not if he is the best and wisest in the whole world. There are lots of nice things you can do with sand, but do not try building a house on it” (C.S Lewis).

    • Jessica Fisher says:

      @Theresa, absolutely. And while our family has followed Dave’s suggestions to get out of debt successfully, I personally don’t agree with everything he says.

      But, Dave Ramsey isn’t the only one saying these things. Most economic advisors recommend paying down debt and having an emergency fund.

      That is common sense.

    • @Theresa, You have a point–no one should blindly follow everything anyone says. As a culture, though, we have had poor spending habits & it’s translating into government. I don’t think it (gov’t) can get better until we do.

  12. We moved to Southern California a year ago and have been renting. At first we thought it would be temporary–just to get to know the area before we bought a house. We owned a home in Ohio for 10 years and thankfully sold it before we moved here. I loved our old house, but it did come with its headaches! We have begun looking at houses and every time come back to the fact that we love renting. We are paying $1,000 less a month then we would on a mortgage here (not only are prices high, but then you have to add in HOAs!). We don’t have to worry about anything breaking or wearing out-just call the landlord. We love our condo and the location. Thanks for a great article that confirms my suspicions about what we should be doing right now!

  13. You made some good points! I always thought of renting as “throwing money away” in a sense… But if you aren’t going to stay in a house until it’s paid off, then you kinda are doing the same thing. Although, buying and selling can be a way of making an investment and earning money in the right economy…. Anyway, thanks for the insight! :)

  14. People need to remember to factor in things like property taxes, higher utilities, home repairs and yard maintenance in the cost of purchasing a home. Not long after we moved in our hot water heater needed replaced. Although I am grateful for my home, I sometimes wish we would have rented longer, saved more and enjoyed being able to call a landlord when a problem arises.

  15. Kathleen K says:

    Great article, very thought provoking. 10 years ago, we Americans thought we had to own a house. Banks and mortgage companies helped everyone be able to “afford” it. Soon housing prices, especially along the coasts skyrocketed. Then the bubble burst. Prices plummeted. But the debt didn’t. Foreclosures skyrocketed. All because we were too greedy and impatient to wait until we could truly afford it.
    $50,000 is not unreasonable to have in savings for an emergency fund. If it is, you probably can’t afford a house right now. 25% of take home pay for a 15 year mortgage is not unreasonable. If it is, you probably can’t afford a house right now. When you calculate costs of rent vs. ownership, be certain you pick up all variables: rent, utilities, and renter’s insurance vs. mortgage payment, utilities, homeowner’s insurance, property taxes, repairs and maintenance and cost of selling (life happens, folks) for the anticipated time in the home. It isn’t a guarantee.
    Just because the Jones act like they can own a home doesn’t mean you should. When (if) you do purchase a house, let it be an investment decision before an emotional one. Buy less than you can afford. And do not listen to the advice of your banker/mortgage broker/real estate agent. They have a vested interest in persuading you to spend more.

  16. With that criteria, half the people in this country would still be renting!

  17. Jennifer Ott says:

    Great article! My husband and I were just discussing this as we prepare to sell our house… This was especially insightful as we might move to CA!

  18. I’ve never really thought much about the benefits of renting versus owning. During the years we were renting, I just couldn’t wait to get into my own home. Interesting post.

  19. We have been renting for the past 4 years during which we have had 2 job changes and 2 moves (one long distance). We continue to rent as we finish our Emergency fund and start saving for a down payment.

    But every time we get house fever and start thinking about jumping the gun, inevitably some major repair has been needed on our rental. Then we both give a big sigh of relief and give thanks we are renters and not homeowners without an emergency fund.

  20. Excellent article. When I use the Dave Ramsey mortgage calculator to see how much interest we would be pay if we took out a 30 year loan with just 20% down it makes me cringe. A $220,000 home (starter home, in our area) would result in paying $187,000 in interest alone. If we keep living in our small (cheap) apartment for 5 or 6 years and continue to save to put down 40% on a 20 year home loan we only pay $85,000 in interest over the period of the loan. That’s a savings of $102,000 in interest!! Even when factoring in our rent for the next 5 years (about $40,000) we still end up saving $62,000 total. $102,000 in interest saved – 5 years rent = 62,000! When I look at it this way it’s a no-brainer for us! It’s easy to get into a mindset that buying a house is what we’re supposed to do when we’re newly married and it isn’t always the right thing for everyone.

  21. I’m also from Michigan and currently trying to sell my house. Not for any major reason, just a lot of little ones. We built it 4 years ago and made sure that we could afford it based on my husband working 40 hours per week – then he was working 50-55. Thank goodness we did! He was pulled back to 40 hours per week the month before we were able to move in and has stayed there since. Now the market is such that we can afford to buy in town instead of out in the boonies – which will save us both money and time each day for travel. And we’ll be looking for a more inexpensive home as well – so that we can properly fund an emergency account all while saving on a mortgage each month. Though we also kick around the idea of renting for awhile as well – so for us it really comes down to what’s on the market when we’re able to sell. if we find “the house” we’ll buy, if not – we’ll rent!

    Now to sell the house……. ;-)

  22. Laura Evans says:

    Interesting thoughts. However, I want to share that home buying works for us, and we do not meet most of your criteria. When we bought our home two years ago, we had only $10000 in the bank at the most after a 5% down payment on a $80,000 house. We bought below our means and shopped around for a good deal. We are young, in our twenties, and don’t always know what the future holds, except we are dedicated to staying in our home. We live paycheck to paycheck–yet pay our bills, something we were not able to do in this area while renting. I don’t mind paying for a mortgage, even with interest, as it is less than anything we could rent in the area.
    We are not wealthy, or even considered middle class. We don’t make combined with two f/t incomes $50000 a year. Putting this stipulation on owning a home excludes everyone lower than the privledged. Not everyone is the same, and while you may call your principles “common sense” I disagree. Everyone lives their lives differently and needs to do what is right for them–not Dave Ramsey. I found this post to be written in a very condescending manner.

    • Jessica Fisher says:

      I don’t think anyone meant to condescend to anyone else, and I am sorry to hear that you felt that way.

      It is true that these factors can all vary depending on where you live, what the housing market can bear, and how much you make. In your situation, if buying is cheaper than renting, then it probably does make sense to do that.

      When we bought our first house, we did not have an emergency fund, zero cash, and we lived paycheck to paycheck. We were frugal, but we lived speculatively, counting on the next paycheck to squeak us by. We continued that way for about ten years. But, life happens, babies come, health fails, and unemployment comes our way. One day we found we were in the hole. We had to sacrifice a lot to get back on our feet, but we paid it off. That feeling of being in the hole is one of the worst feelings I’ve ever had.

      I love owning a home. But, it’s not worth risking my children’s security in an unstable market. I disagree that it is only the “privileged” that could buy a home while still having an emergency fund. I think that if we want something bad enough, we’ll sacrifice to make it happen. But, again, it depends on which housing market you live in.

    • @Laura Evans, I totally agree with what Laura said, word for word!

    • @Laura Evans, I’m sorry that you felt it was condescending. I didn’t intend for it to come across that way.

      I do, however, stick by my original assertion that you need to have money to weather a storm & make a down payment however those numbers look in your situation.

  23. Kathleen K says:

    We should all remember that our personal value is not tied up in what we own or have. Our personal value is who we are and the relationships we have in our lives. Our net worth, on the other hand, is directly related to how much we own and owe. (For non-number people: net worth is value of everything you own minus everything you owe.) It is certainly possible for a couple making less than $50,000/year to save $50,000. But it won’t happen in one or two years, and maybe not even in 10. I’ve also seen people who live in million dollar homes who have less net worth than a family making $50k. The key is to save for a rainy day, because rain always happens. And always buy less than you can afford.
    Just so you know: this isn’t just talk. We are walking this walk. If I gave the details, the post would be too long. Suffice it to say I am not ashamed to say when necessary, “we cannot afford that right now.”

  24. My husband is a pastor of a church. When we moved to our current town, we were blessed to be able to move right into a home, the parsonage of the church. When we moved here about 5 1/2 years ago it was just the two of us, we now have three children. Our house is about 2200 sq. ft. We do not pay for our home, however, if we chose not to live here and wanted to buy our own home, my husband’s salary would increase around $750 to cover rent/mortgage. We have been struggling with the decision to purchase a home for the last two years. It is hard to know what to do. There are several improvements we would like to make in the house we live in but feel like we would be throwing our money away if we did this because it is not our investment. Somedays I think we should be content to live in a free home, but then I remember that its not really free because my husband’s salary is decreased while we live here. Any advice for this situation would be greatly appreciated.

    • Jessica Fisher says:

      @Kristi, we rented a 200 sq ft cottage (yes, really) when we were newlyweds. It was the cheapest thing we could rent in Santa Barbara and it was in an excellent neighborhood. Even though we were renting, we chose to make some improvements that made living there that much easier. We lived there for four years. Making some changes to the place made living there so much nicer which helped us be more content with 200 square feet which saved us a lot of money in the end.

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