You are gambling with your families’ future when you take out a home mortgage

You are gambling with your families’ future when you take out a home mortgage

By Vic Napier

For reasons I’ve never been able to understand everyone seems to want to buy a home. This has never made sense to me.

It’s obvious to me that for most people buying a home is a bad idea.

The biggest problem with homes is that for most people they are too expensive.

It’s true that the average monthly mortgage payment is a little over $1000, but that just scratches the surface of home expenses. You need to pay insurance and taxes, plus the standards like water, sewer electric and garbage.

But don’t forget the costs of landscaping — even if you do it yourself, there are all sorts of supplies like fertilizer, plants and fuel for the lawnmower.

Remember to add in opportunity costs — the amount of money you could be making if it weren’t for all the time the house demands. You could hold down a part time job or creating equity is a side business if you had the time.

But you can’t. Instead, you have a house.

And let’s not forget one other financial burden of home ownership — about $5,000 in easily liquefiable assets to cover emergencies. Insurance doesn’t cover everything. The more you have insured, the higher your insurance premiums will be, so it’s tempting to cut back on coverage or deductibles.

Sure, you can cut back on the amount insured or increase the deductible, but that means you need a bigger emergency fund. If the heating system needs major repairs in the middle of the winter, you need cash right away to stay warm.

But that’s not all.

Now that you have that great house, you have to fill it with appliances and furniture. After closing fees, you will probably buy these big-ticket items on credit, so add those expenses, including interest charges, to the monthly bill. Add them to your home insurance policy also, and prepare to pay a bigger premium.

Real estate professionals are quick to point out the tax advantages of owning a home, and that is true, but only if you are making enough money that you need the deduction. The median family income is slightly less than $60,000, and tax advantages have only a minor effect. In fact, when mortgages require ten or twenty percent down and interest rates are increasing, home ownership is out of reach of most median income earners.

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