I am a cheerleader for home ownership. Not only do you have the freedom to decorate as you please and the security of knowing that no one is in your home when you are away from it, you also get budget control. Rent has a tendency to go up every year stealing your raise before you even get a good look at it. Fixed mortgages do not.
In most instances, you also get a plot of land with your home ownership which, used wisely, can minimize your food budget and give you control over what chemicals go on your fruits and vegetables.
I am not, however, a fan of the 30 year mortgage. I don’t believe in making “payments.” As you make the payments on a 30 year mortgage, you end up buying your house two and three times over because of the interest payments. Amazingly, it’s very hard to convince normally reasonable people to understand that the tax deductions you get on mortgage interest are a fraction of the interest you are paying out.
It’s very easy to quickly pay off a mortgage. First, obtain an amortization schedule on your mortgage. You’ll notice that in the early years, you are paying mostly interest. The principal payments are very small. Write a check for your regular monthly payment and write a separate check marked “principal payments” for as many of those early principal checks as you can afford and still have a little money to put in your rainy day fund.
At the time you are applying for the mortgage, you can also negotiate for a higher monthly payment. In 1989, I purchased a new, double-wide mobile home. Not the Taj Mahal, I will admit, but it was adequate housing. The lender set up the payments for fifteen years at $375 a month. I asked them to round it up to $400 and instantly, I knocked three years off the payment schedule. I made as many monthly principal payments as I could afford and paid off the note in 1995.
The home was set up on the back of Momma and Poppie’s two acres. The acreage was Momma’s inheritance from her Momma but it languished for ten years before Poppie was able to build a home on it at the front of the property.
In choosing to live on a family compound like the Bush and Kennedy families, I obviously had a good relationship with my parents in which they understood that I was an adult making my own life choices and they could not interfere with those choices. The arrangement has suited and benefitted all of us for the last 22 years.
I consider the family compound to be an improvement on home ownership. It takes family support to an all new level. As Shannon Hayes said in her book, Radical Homemakers: Reclaiming Domesticity from a Consumer Culture, “Utilizing family relationships to share, rather than replicate assets is, beyond a doubt, key to unraveling the extractive economy and rebuilding a life-sustaining economy.” I covered the “extractive economy” in my February review of her book. I have to agree with her about utilizing family relationships and avoiding the replication of assets.
In terms of assets, Poppie and I have, together, bought at least three riding mowers in the last 22 years. The expense of garden tools, fertilizer, and grass were also shared. I recently bought a new leaf blower for the property and he bought a new gas edger. We also share the labor of keeping the property looking park-like. Poppie helped build my front deck including a decorative railing, he has fixed many frozen pipes over the years, allows me to consult with him on the best way to hire someone to fix things we can’t (i.e., tree removal), transportation to family parties or car repair shops has been shared, as well as the job of watching over the property. I have often received a telephone call from them that “some stranger” was headed to my house. Momma also made many contributions that helped support my working years. Her leftovers saved me from having to cook many times. We even shared a joke about saving the “scraps for the dog” and I, of course, was the dog.
My major contribution to the family compound was paying the property taxes each year but as Momma and Poppie age, I have been able to return much of the support they offered me in my early years on the property. In the last three years, both of them have been in and out of the hospital and have called on me to buy their groceries, pick up their drugs, take them to doctor’s appointments and the like. Living on a family compound is beneficial to every single family member.
Even if you can’t or don’t want to live on a family compound, home ownership is the way to go. By paying my home off early and saving a portion of my earnings, I had the financial freedom in 2000 to go back to school for a year. It wiped out my savings but I never regretted it. With the economic meltdown, my job disappeared to part-time workers but my house and car were paid off. There was no big adjustment in moving from paycheck to unemployment check although I’ll admit to becoming frugal in ways that did not previously occur to me. I have now been unemployed for three years and have probably weathered that circumstance better than others. Home ownership was the key. A home that is paid off is also the only way you are ever going to have choice in your life. Choice comes from being debt free and saving a portion of your earnings.
Update: Obtaining homeowner’s insurance in a rural area is sometimes more difficult due to the lack of fire hydrants. See Insuring A Rural Home.