After coming across yet another blog about renting versus buying, I decided to explain how we chose to buy a house.
First of all, I was extremely frustrated that our rent was increased by 5-10% at the end of every lease. We were clean, quiet, and paid early every month. I was always able to cut down on the increase, but I could never stop it completely.
Secondly, having to ask permission to change absolutely everything meant we never changed anything at all. Our apartments didn’t feel like homes…they felt like temporary bases. We did everything that we do now in a house, but now I’m surrounded by the colors we picked out and art we made and that we finally allowed ourselves to buy since we felt stable.
The Numbers Were in Our Favor to Buy A House
Thirdly, the financial numbers worked in our favor in our area. No, it isn’t wise to buy a house that you cannot easily afford. That means that we would probably never allow ourselves to buy a house if we lived in the high cost areas along the coasts. Luckily, Houston has inexpensive homes in good locations. After looking around for a couple of months, we found our house – the perfect starter home for us. This is how the numbers looked:
Rent was costing us $8760 a year and was increasing 5-10% a year.
Our home was going to cost us $24,000 up front (20% down and closing costs) and cost an additional $15,000 a year including taxes, insurance, and maintenance for 11 years. After the end of 2017, we’d only need about $4500 a year for taxes, insurance, and maintenance, and we were budgeting for that to increase 3% each year (our taxes have actually decreased since 2007, but these are the numbers we used).
That meant that with a 5% increase every year on rent and a 3% increase every year on property taxes, we would be breaking even with home ownership in less than 20 years plus we would own a home outright in about 11 years. In less than 20 years of renting, we would have paid just as much and have no physical thing to show for it. That alone would have convinced me to buy a house in our area.
Lastly, by putting 20% down on a foreclosure that was already heavily discounted since it was on the market for more than a year, we had instant equity. This didn’t effect our decision much, but it was nice to know that we could have taken out a home equity loan if necessary. I like having lots of options when it comes to finances.
Over the past 3 years, our taxes have decreased but our equity has increased. We are still on track to pay off the mortgage by the end of 2017…maybe earlier if I get my way. We had a very cheap first year of home ownership. We’ve spent less than $300 a year on home maintenance since it was built very well and barely lived in at all before we snatched it up. To be honest, we have spent almost $3000 on new floors downstairs and paint, but that was a choice and makes us very happy.
No, home ownership is not for everybody. It’s not even a good financial choice in many areas. I also know that I don’t enjoy having to fix my own problems. Yet, I wouldn’t change a thing.
How about you? Why did you or will you buy a house? Do you enjoy renting instead?