55 Years Old – Don’t Buy A House
September 8, 2017
If you have owned a house and paid off the mortgage over the years you know the first 10 years is almost all interest payments with very little equity.
There is nothing wrong with buying a house as long as you can qualify. That means a good down payment and a steady job. None of that no-down-payment nonsense. The buyer must be serious about making those monthly mortgage payments and have a good job. Banks are checking these days.
The financial community in the recent past has been required to make mortgages for those who did not qualify with no down payments and had no serious intention of paying if it became economically uncomfortable. It is too easy to walk away.
The true cost of home ownership is not just the monthly mortgage payment. In a new house all the appliances, plumbing, roof, pool equipment, window frames, etc., etc., everything has an estimated life expectancy after which they need to be replaced.
Buying an older home means all of the above will occur sooner. Replace or repair can be expensive.
The true cost of keeping the house is the mortgage payment plus upkeep. Oh and let’s not forget taxes. Then there is a little thing called insurance that is required by the mortgage holder.
The industry calls it PITI = principle, interest, taxes and insurance. Depending upon the length of time of the mortgage and whatever your down payment was it normally comes out 10% annually of the selling price divided by 12 or 1% of the selling price each month.
If the house cost $200,000 that figures about or close to $2,000 per month.
If you are 55 years old do you want to take on that obligation? Wouldn’t it be smarter to rent? If the same quality home can be rented for $1,200 per month the renter could save the difference of $800 each month and in 10 years at retirement have $96,000 plus interest. I can guarantee he would not have that in home equity if he bought the house when he was 55.
Furthermore renters pay much less for rental insurance and have the ability to move to a new location any time. Renters do not have to put on a new roof or replace an old hot water heater. No major upkeep out of pocket expense.
How about a 6 month rental in Canada for the Summer and 6 months in Florida, Mexico or Dominican Republic for the Winter? The only extra would be travel expenses.
With so many rentals available the foreclosure prices are not yet a great buy. If a person wishes to buy there are yet about 4,000,000 more distressed properties to hit the market in the next 2 years. Prices will be even lower than today.
Do the numbers before you buy.