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| Ocean City, MD during sunset |
Walt Whitman: “I take to the open road. Healthy, free, the world before me.”
The day we started our early retirement (August 24, 2020), was the day we said goodbye to our townhome, a place we called home for close to 14 years. It was the best “home” we had up until that point in our (my wife and I) lives.
Lots of good things happened while we lived there: I got my last job, which would allow us to retire early and we brought home our baby Toby, a super furry Pomeranian! It was truly an “American Dream”, to be able to live in a nice suburb of Philadelphia, feeling safe with plenty of room to roam inside our 3 story townhome.
We felt like we had “made it”. We would spend evenings sitting in our walkout basement, looking outside at the fast moving traffic on US Route 422 while talking. We would play our favorite music in our living room in our surround sound home theater system by Onkyo. On weekend mornings, all of us would hang out in our walkout basement, playing with Toby.
Life was just about perfect. It was what every American (and probably most people) would want: to have a home to call our own, a safe place, a place of refuge, and nice enough and big enough place to rest our weary souls after a hard day at work.
It was bittersweet to let that home go that day. We had so many awesome memories together. It was a place we thought we would grow old together, to maybe one day pay off the mortgage, and finally live mortgage free!
Well, that mortgage free day never came on that townhome we called home. We sold it with about 7 years remaining on the mortgage. Although we would never know what it’s like to be living in a home without a mortgage, we know our current life, living without a mortgage, isn’t too bad.
Let me explain.
For all the great things owning a home represents, like that fuzzy feeling of being a homeowner, there are so many not so great things about owning a home. Here are some of those things:
- Home may be damaged due to natural disasters such as earthquakes or flooding, that may not be covered by home insurance
This year has been brutal for natural disasters: scorching temperatures recorded everywhere, flooding in Asia, wildfires in Canada and California, earthquakes in Turkey and Morocco, just to name a few. Every time I hear of these disasters, it makes me appreciate that I don’t own a home!
Sure, in the United States, organizations like FEMA (Federal Emergency Management Agency) can provide relief in case of some natural disasters. But even if an emergency is declared, the maximum amount a household can receive is $41,000 for home repairs, according to FEMA website.
In actuality though, an average household relief amount was only about $8,000 for Superstorm Sandy, according to FEMA. This doesn’t begin to cover much of anything for a household with gazillion stuff!
Even if you have flood insurance, if you live near Florida’s hurricane prone areas, then the cost to insure your home will skyrocket each time a hurricane hits. There have been reports of insurance companies leaving Florida and California, leaving many residents to scramble to find another insurance provider.
Bottom line: it’s getting harder for homeowners to live where they want, especially near certain disaster prone areas like coastal Florida and major parts of California.
On top of that, who really wants to go through the process of repairing/replacing their damaged home and household items and/or go through the process of getting checks from FEMA? I know I don’t…
- All those money paid to banks in the form of mortgage interest!
If you take the median sale price of a home ($416,000 in Q2 2023), put down 20% to avoid PMI (Private Mortgage Insurance), for a 30 year mortgage at 7.5% interest rate, then you would be paying around $505,000 in interest alone! Ouch. That is more than the price of the home!
- Don’t forget the money you throw away when buying and selling your home either
There are so many fees on top of fees when closing on your home. Such are:
- Application fee
- Loan origination fee
- Attorney fee
- Escrow fee
- Courier fee
- Credit report fee
- Flood determination and monitoring fee
- Homeowner’s insurance
- Lead based paint inspection fee
- Title insurance
- Pest inspection fee
- Prepaid interest
- Property appraisal fee
- Property tax
- Recording fee
- Survey fee
- Title search fee
- Transfer tax
- Underwriting fee
- Did I miss anything else? There may be something else I left out. Wow…
Typically, you can expect to pay anywhere between 3% to 6% during closing, which isn’t exactly chump change. Since you will most likely buy then sell, these fees add up…
- Plenty of money needed for upkeeps…
As all homeowners know, there are endless number of upkeeps on a house. Here are some that we’ve personally done:
- Gardening and mulching (twice a year at least)
- Painting (exterior/interior)
- Exterminators to get rid of mice infestation
- Cleaning (exterior/interior)
- Roof replaced due to water leak/damage
- Replaced carpets with wood floors
- Got new countertops, faucets, sinks (this was for our enjoyment; we didn’t need it)
- Replaced plenty of batteries for everything from garage door opener, smoke detectors, to internet backup system
- Replaced water heater twice!
- Replaced and/or repaired toilets
- Had tree roots removed as it was lifting the concrete in our driveway
- Repaired windows
All in all, we spent plenty of money each year on fixing/repairing/up keeping our townhome. Experts typically recommend putting aside 1% of your home’s value towards maintenance. I’m not sure we paid that much every year, but all the above items certainly added up…
- Property taxes and other various municipality/community taxes!
Property tax on our townhome was around $3000 when we bought it in 2006. By the time we sold it, we were paying over $4000. We started noticing there were other added taxes that we didn’t see in the beginning like community college tax and emergency services tax.
When owning a home, you cannot not think about taxes…
- Your home’s value may or may not go up in value, like our townhome
We had lucked out twice buying/selling our previous apartments in New York City and in Hawaii. We made money on both, pocketing over $100,000 on each sale. Third time wasn’t a charm in our case, as our townhome appreciated in value by only about $20,000 after 14 years.
Add it all up, here are the key takeaways on home ownership:
- When buying a home, you must consider things like upkeeps, home insurance/flood insurance/hurricane insurance on top of a mortgage payment.
- When buying/selling your home, you will be paying a good chunk of change during closing.
- If you’re like us, your home value may not increase significantly. We actually lost money when you figure in all the money we spent during our 14 year ownership of our townhome.
If you take an average home in our example ($416,000) and actually pay off the loan after 30 years, you’ll still lose money if you sold the house for double what you paid for thanks to that exorbitant interest over 30 years. Add in money spent on taxes, home insurance, upkeeps, etc., you’d better hope you can sell it for well over a million dollars to make money.
The more I think about this, the less I feel good about owning a home these days, especially when home prices are at their highest ever, and when interest is the highest in over 20+ years…
After considering all of these factors, we are happy (at least at this moment in our lives) to not own a home. We have so many good reasons why we don’t want to own a home right now. Here are some of those:
- We could live free without the constraints of a monthly home payment, mortgage and/or rent
Everyone can relate to the dreaded due date of a mortgage or a rent each month, usually on the first of the month. Some months like February where there are less days in a month, the beginning of the next month (March) seems to approach even faster.
We, just like most people, dreaded the beginning of the month when all bills are due, of which mortgage was by far, the biggest portion of our monthly expense. Living without a monthly housing payment these days is an absolute relief!
Paying for a long term stay using AirBnB or similar is different from a monthly housing payment, as we can choose to stay at an AirBnB for the month or not. We at least have a choice. If we want to stay with family, we can, which means that month is rent free.
- We can travel, whenever we want, without needing to pay a housing payment on top of hotel/lodging costs
When we owned our home, a vacation was usually a week long affair, and definitely not longer than a two week affair. We couldn’t justify having to pay a mortgage and hotel/lodging for more than a week at a time. To us, it just seemed like a big waste of our hard earned money to do that.
Had we still owned our home after retiring early, we couldn’t possibly have the money to travel the way we do these days, often spending a month or longer traveling. I mean, how many people can pay a mortgage and have the money to stay 3 months away from their primary residence? We know we can’t…
By having no housing payment, we can plan a cross country road trip that may last over 2 months or longer, and we can choose to make it shorter or longer as we please. We don’t have that nagging feeling at the back of our minds that remind us we’re wasting away our hard earned money on both a mortgage and on hotel/lodging.
Freedom is a beautiful thing. At least for the time being we’re going to enjoy this!
- Not having a home is liberating, aside from just purely financial aspects of it all…
Not having a permanent home means we no longer have to worry about things like needing to buy stuff, repairing stuff, up keeping stuff, and worrying about approaching natural disasters. The first year of our townhome ownership, our area was inundated with heavy rains after heavy rains.
It seemed it would never stop raining! We watched the water drain at the back of our townhome fill to the top, reaching very close to our walkout basement. Had it rained another day or so, it may have breached our basement.
On another occasion, there was a tornado(!) that ripped through several of our neighbors’ homes, breaking apart roof tiles, sidings, and light fixtures. We were spared but it certainly made us think about what it could’ve been…
Owning a home is not without risks, just like in life…
We may end up buying our own place down the road. Just not right now. There are so many places we want to explore by car and we’re going to enjoy this life without a permanent home right now.
In conclusion:
It has been just over 3 years since we sold our home. As tough as letting go of that townhome was, in due time, we learned to appreciate our lives without a permanent home. It meant we can spend time with our loved ones and it meant we can finally travel this great country of ours.
We’re both believers in adapting to new environments. As any life form would, adapting is the key to surviving and thriving. We can’t be holding on to our pasts, regretting, crying over the way it used to be.
Things always change. That goes for life as well. If we don’t adapt to rapidly changing environments, we will perish. Learning to adapt is a motto we live by.
And with that, we’re going to enjoy this particular moment in our lives, namely a life without a permanent home. It has been a very interesting, usually fun, and very rewarding journey for the two of us since we decided to let go our our home and retire.
We will change again and adapt as situations change, but for now, it’s just about perfect…No more stress from a mortgage and owning a home!
Keep up with us on our continuing journey through our early retirement, and thank you for reading!
Jake
Wandering Money Pig
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