Tuesday, January 02, 2007

Home Ownership - is it Really Less Expensive

There is so much to do and so little money to do it with. Yes, I'm whining. Yesterday, I saw that my Home Repair savings has risen by $100, so I took out my "To-Do" list to see if there was enough money to make one of the most pressing repairs.

There still isn't enough to do a major overhaul on the porch (the most pressing repair), but that's not why I'm whining. I'm whining because that "To-Do" list is never ending.

After doing some calculations, I realized that by the time I save enough money to make the most pressing repairs, regular maintenance for everything else will be due.

This got me to thinking about how expensive it really is to own your home. Conventional Wisdom says that you will save money and build wealth
by owning a home and building equity, not by renting and giving someone else your money.

But, I'm beginning to doubt so-called conventional wisdom.

Now, certainly, renting is giving your money to someone else in exchange for housing, with no end in sight. And it is logical to assume that owning your home - not having housing payments - during your retirement years puts you in a much better financial situation. But, does it really?

Well, I guess that depends on the maintenance costs of your home, and on how high your property tax might rise during your retirement years.

And - here is the kicker for me - how will you be able pay someone else to do that maintenance once you're old and not making money any longer? Are you assuming that you will still be able to do your own maintenance even into your 60s and 70s?

I'm assuming that you are somewhat like me ( meaning you aren't going to have a million dollars to spend during your retirement). So, how are you going to pay for the roof that needs to be replaced, the new hot water heater, porch repair/replacement, vinyl floor repair, carpet replacement, resurfacing grungy cabinets, leaking/rusting faucets, new elements for the stove?

And, how are you going to keep up with yard maintenance?

Some of us may be able and willing to push that mower around when we are 60-70 years old, but I'd say that it would be a real toll on most of us.

Pat Veretto, at Frugal Living found that she could do much better by selling her home, investing that money, and using it to pay rent. She not only came out ahead financially, she no longer had to worry about making home repairs, keeping up with maintenance, or dealing with the cost and physical toll of lawncare.

It makes you think. Are we really in a better position financially when we take on the cost of ownership of a house and yard? Is the cost of property taxes, appliance maintenance and repair, home maintenance and repair, and landscaping really less expensive than renting?


Mrs. H. said...

Well, you could always just sell your home to your grown children, and take on a smaller home in an assisted living community, or a condo, or the like.

I'm 26, dh is 32, and we just bought his father's 3 bedroom/2 bath home last month. Dh's mom passed away last year, and his dad works overseas, so he doesn't have the time to keep up with the maintenance of a large home and acreage, so he sold it to us. Since we have four children and one on the way, it's great to finally own a house that fits us, with plenty of room for the kids to play. Dh's dad gets to use the outbuildings for storage, and he leaves his vehicles here while he's working. He plans to either purchase a smaller home, or perhaps a condo that would have maintenance built into the cost. Just another alternative.

F_M_M said...

That is an alternative, Mrs. H, thanks for posting it.

Personally, I have had so many unpaid debts from my family that I would would be hard-pressed to enter into a financial commitment with family if I was depending on the payments to support myself.

It seems that some family members don't see "family" loans as "real" debts and think you should just eat the debt yourself if they find it inconvenient to make payments.

What makes this worse is that often the family member who has borrowed from you tends to avoid you as they would a creditor and it ruins relationships fast.

It's wonderful that you and your FIL have come to a mutally beneficial financial agreement. But, it's not something I would recommend for most people.

Mrs. H said...

Let me clear up my statement. We aren't paying dh's father directly for this home. We took out a real 30 yr. mortgage from a financial institution, so dh's father received the full amount of the agreed upon purchase price on the closing day. We did get a great deal on the house from my fil, and paid much less than the appraisal price for it, but we chose to go with a traditional loan instead of ending up in a situation such as you described. He also sold us his 2nd vehicle for a good price last year, as dh's died and we needed a car badly. We took out a regular vehicle loan for this as well.

Angie said...

Mrs. H

Thank you for clearing that up. It sounds like you and your fil have worked out a great deal. He is helping you and your family, and you have handled it as a business transaction which protects both your fil and yourself.