Probably the biggest financial decision someone has to make is when and if to buy a home. Here are five things I learned in the 20 years that I have been a homeowner.
When I was purchasing my first home, it looked as if owning a home would be about the same as renting. After I purchased the home, I found it wasn’t a simple rent vs. mortgage comparison. There was the homeowners association (HOA) fee, property tax, and homeowner’s insurance. The utility bill for a six room house is more than the bill for a one bedroom apartment.
While you own the house, the HOA decides what you can do with the outside of your house. A family on my corner used red mulch. A few days later they had to remove it. The HOA can restrict your creativity, but they prevent your neighbors from implementing their tacky landscaping ideas.
When I purchased the house, it was a quiet area with a view of trees from my read window. Soon after I purchased the property, the view was of a construction site. Now the view is of condo units. Road construction turned the quiet street into a busy thoroughfare and a speed trap. In contrast, behind my second house is a wetland so there can never be construction behind this house.
I found purchasing a home intimidating. Each time I purchased a home it meant a 30-year mortgage. I purchased my first home with a 7 percent interest rate. When interest rates dropped a few years later, I easily refinanced it with a 15-year mortgage at a 5.5 percent interest rate. When I purchased my second home, I was also able to refinance when the interest rates dropped again. This time the refinance meant $800 less on my monthly mortgage payment. Homeownership meant a tax break which wasn’t available to me when I rented.
I learned that owning a home meant should I want a loan for a large purchase a home equity loan was a possibility.
Homeownership is a big financial leap. Your home is not your castle if there is an HOA involved. Outside your home is outside your control. I found becoming a homeowner was the best long term financial move I made.