…Home Ownership Is Not A Savings Strategy
1. While even turkeys fly in a strong wind and a housing boom makes every home owner look smart, economists have shown that houses generally cost more than what most people make when they sell. In addition, the gains don’t match watch can be earned through long-term stock ownership.
2. When you add up interest, insurance, regular maintenance and a couple of costly repairs that are inevitable, a home owner can spend up to three times the purchase price of a house over the life or a mortgage. Look at the Cost of Home Ownership here.
3.Over half of monthly payments go to covering interest during the first half of the term. More so, over the first five years of a mortgage, it is almost all interest. What this means is that if you sell your home early in the term of your mortgage, little money is made as ittle equity is built.
4. Home owners often pay more for a house than they can afford, resulting in large mortgage payments and little ability to diversify their investment outside of home equity. Furthermore, with companies freely offering low-deposit mortgages, buyers are often deluded into thinking that they can afford to buy a bigger house than what fits their budget. As Suze Ormon notes, “Never forget that it is one thing to buy a home, but it is another thing to be able to keep that home.”
For a nice summary of key myths surrounding home ownership versus renting, click here.
