5 Reasons Why Home Ownership Might Not Be For You
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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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@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.
$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.
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.
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.
@Susan @ Busy at Home, yes, thanks for pointing out that the 50K will vary, though I think it depends on expenses and income more than region.
@Susan @ Busy at Home, I agree about the PMI & home maintenance. Thanks for the compliment, too!
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.
@Tammy @ Skinny Mom’s Kitchen, Me, too! :D.
I am sharing my sweet Almond Butter Truffles. Thank you for hosting.
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?
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.
@Nora, take heart. I think we’ve all made those kinds of mistakes. They just look different.
@Nora, it’s tough to deal with a mistake — especially since hindsight is 20/20. I guess that as long as we learn something it’s not ALL bad :). Have a lovely week!
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
@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.
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!
@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.
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.
@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.
@Jessica Fisher, I don’t see rent as throwing away money, either. I’m paying for a roof over my head, so I’m getting something for that money!
@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!