There is no shortage of discussions on the pros and cons of homeownership in the FI community. If had to guess, it seems most folks come down on the side of not owning a home as a way to accelerate the path to financial independence. I don’t argue that this is wrong but, in this instance, my decision comes down to psychological reasons, rather than purely financial ones.
In the neighborhood where I live, my mortgage is lower than what I would pay to rent. In fact, for the first two years after my separation from my ex-husband I rented homes with my three kids. The amount of my mortgage payment now is $500 less than what I paid to rent in my neighborhood (Although I am paying $650 extra monthly towards my principal in order to pay my home off in 15 years).
When my children and I were renting, I was constantly on the lookout for any damages we might cause to the house. This quickly lead to feeling as if we were “living in a museum” where many things were off-limits, excess noise was immediately quieted, and comments from the landlord about toys scattered in the yard were discouraging. The worst thing that happened while we were renting was caused by carelessness on my landlord’s part: an illegal heating oil set up lead to a massive spill in the basement causing us to move out of the house and deal with months of strong smelling residual healing oil which permeated all of our belongings. The resultant lawsuit I brought forth was stressful, and even when I awarded a generous settlement by a Small Claims Court judge. I was left feeling vulnerable, and fearful for children’s health. This short experience with renting made me value the security that home ownership can offer. It also allows my children the freedom to live their messy, happy, noisy childhoods.
Within the FIRE community, there are many ideas on how to make home ownership a better financial move. One home ownership hack I engaged in was to purchase ‘discount points ‘ up front to further lower my interest rate. I took this money out of my down payment funds, which meant I was required to pay Private Mortgage Insurance (PMI) until my house value dropped below a certain threshold. As I pay an additional monthly amount toward my principal, I was able to reach this number within two years and petition my mortgage lender to cancel my PMI early. I plan to post a more detailed account of this process and how it is saving me $ over the long-term (I will link it to this post).
Freedom and security. Although home ownership may not work for every situation, I argue that for single parents and families it is an important consideration. By carefully choosing your neighborhood, shopping for a low interest-rate, and looking at home ownership as part of your investments and net worth, you might find this to be a good financial AND psychological choice.
Bottom line : Would I get to financial independence faster if I did not own my home? Maybe, but not definitely. And the peace of mind for me, along with happiness and freedom for my kids, makes this a choice that works well for my family.
Any thoughts? Please join the discussion below…