Up until a few years ago I was sure I’d be a renter for life. But when my babies were born I wanted to give them a solid home environment and not need to move whenever my landlord decided to make changes. With that in mind we decided to buy an affordable starter house while we were still renting overseas.
We’ve since downsized from that house and continue to rent it out to tenants. We moved into a smaller property we own in a much better location and so far it’s proving to be one of the smartest decisions we’ve ever made.
A lot of people eschew home-ownership as anathema to financial freedom. But we’ve found it quite the opposite. A mortgage-free house provides options and financial security, not to mention a consistent home environment for my boys. Owning a home doesn’t stop us from travelling extensively, in fact, it is enabling us to travel to new, more expensive destinations. That said, the monthly mortgage payment needs to be paid each month and that’s money we could use to pump up our travel fund.
Here’s why I’m aggressively paying off the mortgage, even though I want to travel the world.
Your payments end eventually
Once you’ve paid off your mortgage you can live in your house for life with just the cost of insurance and property taxes, plus maintenance. The problem with renting is rent never ends. Rents continue to increase as life goes on, whereas the interest portion of your mortgage will reduce as you pay back the principal. The reason many people decide that ownership is not for them is because of the huge amount of interest you pay if you take a mortgage on a long-term loan. We intend to pay the mortgage back early so our interest cost is minimised.
You can leverage home equity into rental property
Another reason we like to own our own property is because we can use the equity in a home mortgage to leverage into rental properties. Right now we could take over $150,000 in loans to buy a bunch of new properties. We don’t plan to, but it’s nice to have the option.
You can put a nail in the wall – or remove a wall
I cannot overstate how lovely it feels to be able to decorate a space to your own tastes. You can hang a picture on an actual hook or renovate without worrying about landlords taking make-good money out of your deposit.
How demeaning are property inspections? I have always hated them, but as a landlord I understand why they are necessary. Here’s one of many problems that just disappear when you become a homeowner.
Your home gives you travel options
Another benefit of owning your own home is that you can house swap with other homeowners around the world when traveling. I recently made a post in a Facebook group for world schooling families asking if anyone would be interested in swapping our house in Christchurch, New Zealand for somewhere overseas. I got responses for homes in Hawaii, Alabama and Los Angeles. For the price of my own mortgage I can access some very expensive destinations in the world.
If we want to travel for a longer term, we can put our belongings into storage and rent our house to tenants. Or we can rent it as a short-term vacation rental when we travel. Options, people!
If everything goes to shit, you still have a roof over your head
You know, life. It happens. Jobs get lost, incomes drop. If you own your home (or a significant part of it) you can likely ride out a financial shit-storm by reducing your repayments back to interest only, or even by taking a repayment holiday if you have enough equity built up.
BUT: Home ownership might not be right for you if…
I have to make one huge disclaimer here. If you don’t plan on paying off the mortgage on your home quickly (instead of the longer term of 25-30 years) it might not be a good idea for you to buy a house. You may find that renting is better for you financially ,if you can be disciplined enough to invest the money you save on home ownership . But if you can afford to focus on paying off your mortgage in 10 or 15 years and then redirect those mortgage payments straight into an investment vehicle that’s probably a smart move. It boils down to saving a healthy deposit (at least 20%) and buying an affordable home.
I’ve been tempted by the thoughts of selling my house and pocketing a couple hundred grand to fund a few years of travel. But, ultimately, I believe a mortgage-free house will hold much more value over the longer term. Now we’ve got our mortgage down to 5 figures, paying it off completely feels very attainable.
What do you think? Do you believe it’s a smart financial move to own your home? Or are you disciplined enough to rent and invest the difference?