Firstly, let’s set aside the old chestnut about your home being an investment. It’s not. It’s your home. Investments generate income. Unless you’re renting rooms out in your house it’s not an investment. It’s the place you and your family live in.
Neither (as Robert Kiyosaki would have you believe,) is it a liability. On a balance sheet of assets and liabilities, the house, (having a value,) is an asset and the ‘bloody’ (as it’s known in our house) mortgage is the liability, not the house.
Kiyosaki arrives at this conclusion because if you lose your job, and you’re unable to pay the mortgage, the house becomes a millstone around your neck. Protracted missed mortgage payments mean you may lose your house.
But wait a minute; if you rent a home and you lose your job, meaning you fail to make your rental repayments, you get evicted as well. So what’s the difference?
To some people paying a mortgage is something they don’t feel so good about. If this is you, let me ask you a question ‘how do you feel about paying someone else’s mortgage?’
‘What? Are you crazy?’ you ask.
Well, isn’t that all renting is? You’re paying the landlord’s mortgage. So you end up paying the mortgage whilst never owning the property. Pretty Stupid eh?
If you rent a house for life, you’re paying rent until the grave. The landlord doesn’t let you live in it free of charge just because you reach retirement age.
If you buy a house with a mortgage, you squeeze the lifetime’s payments you would be paying to the landlord, into 25 years.
This makes perfect sense because during those 25 years you’re working and so can afford the repayments.
That means when you retire, you no longer have payments to make on the property you live in. If you rent, those payments continue during a period when you may least be able to afford them.
On the plus side of renting, you aren’t responsible for maintaining the property.
The downside to that, is any repairs or upgrades are done when the landlord can afford to do them. Also, the quality of any upgrade is his choice and not yours. Fancy a avocado bathroom suite? No. Well tough, they were going cheap at Homebase.
The toughest thing about buying a property is the deposit required. Government Help to Buy means you only require a 5% deposit on suitable properties, instead of the traditional 20%, bringing home ownership within the grasp of most people.
Now, there are geographical anomalies in house prices. In London and some other Southern areas, the demand for housing is so great that it has become impossible to save up for a deposit whilst paying rent.
Pretty much everywhere else though, it’s possible to save for a 5% deposit relatively easily.
In fact, in the North East where I live, it’s possible for a 19 year old to buy a brand new home https://youtu.be/gEVNdsloRc8
As I told my kids : live with your parents as long as you can possibly tolerate it. Throughout your life, you will never have fewer bills and more disposable income.
During the time you’re living with your parents, work like Fxxk and save like Fxxk. That 5% deposit accumulates surprisingly quickly.
You will however, have to forego those holidays with the lads and benders at weekends.
You will have to behave different to the herd, and the herd will resent you for that.
Your friends will dwindle away, fed up with asking you to join them, and you sticking doggedly to your plan.
In a short time however, that first owned property will be yours. You will have paid the price. Not just for the property, but the price of being different.
There’s a price to be paid for achieving something remarkable. To most people, the price is too high.