Home ownership is usually touted as the foundation for and means for all Americans to build wealth. However, irresponsible people, those misinformed about the costs of home ownership above the monthly payment, and those who move to higher cost homes every 5 to 10 years generally have not become wealthier than the average renter. Many are as debt laden as many renters having purchased more home than they can truly afford for many years to come. Not to mention, many of their mortgages are severely under water owing far more to the financial institutions that hold them than the homes are worth.
It is not automatically true that owning a home makes you wealthier or will do so in the future. Believing this lie and acting upon it without first counting the true cost of home ownership and debt freedom will cost you dearly as it has many millions of people in the past. Believing the lie will move you to do anything to get a house like accepting predatory lending terms with high interest rates and costs. It will also lead you to believe you can afford what the banks say you can afford rather than you making an honest assessment of your finances to know what you can truly afford while building and maintaining a large emergency fund cushion to handle unforeseen home ownership costs and other emergency life situations requiring large outlays of cash.
Home ownership can be great when you truly can afford the home you are going to purchase. It can bring peace from apartment neighbors making noise bouncing off the walls and it could provide more space to entertain friends. Yet, for many millions of people it is not as financially fantastic as the pundits make it seem.
The 10-35% federal income tax deduction that one may be able to use with regard to mortgage interest / property tax payments is only useful to the extent that your itemized deductions are greater than the standard deduction for your filing status. Also, you must remember that every year throughout your ownership of the house you will pay thousands of dollars in property taxes to your local governments for which you may only get a fraction of a discount via federal taxes or homestead credits. In addition, all the maintenance, repairs, and renovations will not bring greater return for most people given the amount of principle and interest they will pay on the loans they acquire to do these things.
You would say “NO” if I offered you the great deal of giving me $10,000, so I can hold onto it and then give you only $1,000 to $3,500 back next year? You should think of home ownership in the same way, so that you are totally sober and realistic regarding your financial situation being currently able to handle homeownership. It is always best to have absolutely no debt and the cash needed to purchase a home outright. This alone would help people be much more reasonable about the home they would seek to purchase.
However, if you believe home ownership is worth obtaining a loan to make it a reality then you should follow a few simple rules:
1. Pay off all other debt, build at least six months of income as an emergency reserve and also put away enough money in savings to make a 20% down payment at closing.
2. Inventory your work / business picture to ensure that you are not subject to bouts of unemployment or wild swings to lower monthly income within the few years leading up to and after a house purchase. Remember, approximately 100% of foreclosures are a result of the purchasers’ inability to continue paying the mortgages or property taxes.
3. Look to buy a house in an area where the history of home ownership shows steady price appreciation over the last 10 to 20 years, unless the Holy Spirit has spoken that you should move to a particular area He has selected for you for ministry purposes, etc.
4. Only obtain a low interest 15-year fixed rate mortgage and seek to have enough in extra disposable income that you can pay it off much sooner than 15 years.
5. Do not purchase any house where the monthly payment of principle, interest, property tax, and insurance would require more than 28% of your monthly gross income.
If you will act prudently to do these things you will likely find that home ownership will be very kind and good for you and eventually lead to paying lower housing costs than being a long-term renter and it will not stand in the way of the wealth building that the Lord wants you to engage in.
Remember, home ownership is not the key and being a renter is not a disadvantage. Wealth building is accomplished by honoring God, by continually keeping your monthly expenses well under your monthly net income, by becoming debt-free, and by saving / investing your excess cash over long periods of time (5, 10, 20 years, etc.).
Please pray for this ministry and email any questions. May God bless you richly as you follow His plan!!!
Matthew 25:26-29, Luke 14:28-30, 16:8-14, Romans 13:8, Hebrew 7:8
Please forward these bondage breaking articles to other people who can use helpful insight!!!
You can find books authored by Randy and Karen Parlor at www.Amazon.com
No comments:
Post a Comment