I will never get a home loan again. Even if it takes years to finish, we are building our house slowly and owe nothing on it. It’s just smarter. Consider all of these factors before taking out a loan to buy a home.
The Real Cost: How much will you really be paying when all is said and done? If you have a thirty year repayment plan on a $100,000 dollar home with a 5 percent interest rate, you are really paying a little over $193,000 dollars. That’s insane. It’s almost double. An extra $100,000 dollars in your bank account is a nice safety net. A $200,000 dollar loan at the same interest rate and repayment period really costs around $386,000 dollars.
Building Costs: The simple truth is, you can build a much nicer home for the same or even lesser cost than buying one. If you can do a lot of the work yourself instead of hiring someone the savings are astronomical. We are building a gorgeous cabin for around $50,000 dollars and have done almost everything ourselves. We are able to use high quality building materials that are much better than what had been used in the home I had purchased, and we are still saving money! If you have any skills or are willing to learn, I would seriously consider just doing it yourself.
No Payments: Life happens. I never expected to be diagnosed with cancer at 32 years old. I was making close to $80,000 dollars per year. I was in the hospital for months, ended up with medical bills around $500,000 dollars, and we lost our home. If something like this happens to you, are you going to be able to continue payments? I work from home now and I make about half of what I used to, but it’s enough because I have no house, car, or credit card payments. It’s such a stress reliever to know that you will always have a home that’s paid for, can just buy a car with cash if you need one, and have enough money that you don’t need to charge anything.
Customize: Another reason I don’t want a home loan is that by building my own house, I can have exactly what I want. There’s no way that I would be able to find the type of cabin that I have built for anywhere near the same amount of money. When you start from scratch, you can get exactly what you want.
Finding the Cash: A lot of people seem to think they would never be able to afford to build. Home loans seem like a better idea because it’s about the same as paying rent. The answer for me was to live below my means. When you do that, you can really save a lot in a short period of time. The only bills I have while we are building are rent (tiny house), utilities which are cheap because our rental is so small, gas and groceries, and things the kids need. When you downsize your life and really look at what you don’t need, I promise you will save money.