Is your home bringing you money or taking money out of your pockets?
Is your home paid off, or are you still making payments?
Buying a house is really “renting to buy.”
The average person will not pay off their house for decades.
Until you pay off that mortgage, that home is not yours.
So why do many people believe buying a house is smart?
Because they’re taught to do so when they can “afford” a home on paper (i.e., decent credit, fair debt-to-income ratio, and consistent income).
When you have a stable and consistent income and reach a certain age, the next logical step you’re taught to take is to buy a house.
Renting Is Underrated
If you keep your expenses low, you incur no debt from owning a home and can maintain a high disposable income that can be invested to build a net worth similar to that of a person who “faux owns” their home.
Remember, “your” home is not an asset until you sell it.
And if your home is not paid off, you’re only getting the difference subtracted from the amount necessary to pay off your mortgage if you decide to sell.
Are You Ready For That 360-Month Commitment?
The house often comes with more than people expect.
Not only do the taxes, maintenance, and other fees add up, but it’s a long-term commitment.
Unlike leases, which usually only last for 1–18 months on average, a home mortgage will usually last you anywhere from 15–30 years.
A long-term commitment means you must earn x amount of dollars to afford that 360-month mortgage commitment — unless you sell your house.
But many who sell their house buy another one and end up in the same situation.
It’s a rinse-and-repeat process.
The long-term commitment makes sense for some people, but for others, it can be a costly mistake. Not only did they buy too much house (a house out of their budget), but they’re house-poor, which means their investment accounts and emergency funds could be better funded.
Worst Case Scenarios When You Faux Own A Home
These scenarios don’t happen to everyone, but they can happen.
1. You Lose Your Income
If the average person can’t afford a $500 financial inconvenience, which means they don’t have a 3–6 month emergency fund or much in their investment accounts, the average person can’t afford to lose an income source if they have a home.
2. Homes Don’t Always Appreciate
Real estate usually appreciates on average, but this is not always the case.
Some people buy a home that depreciates, which equates to bleeding out until you sell your home.
3. You Struggle Managing All Your Expenses
Many are barely making it.
I know two people who both “faux own” their homes right now.
One has to live with two roommates to afford their home.
Another has to sell their home and stay with their parents and has little to nothing in their investments — all while approaching 40 because they couldn’t afford the home in the first place.
Faux owning a house looks good, but it’s not worth it if you can’t afford it.
Before You Buy A Home
Always consider buying a place that is under budget so you are well prepared for all situations.
Moreover, it decreases your stress load and increases your freedom.
Homeownership should be about freedom, not stress and fear.
Decide what you want from “buying” a home.
Do you need the home? What are you hoping to get out of it? What would happen if you continued renting? How might your budget shift if you got a home?
Continue asking questions to better understand your motives behind “buying” a home.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.