Aren’t you happy you didn’t buy in CA?

I know what you mean- a mortgage is such a HUGE debt. It is definitely scary.

“Who’s afraid of a big, bad mortgage?”

I am! I am terrified actually. So I totally understand your feelings dear .

There are alternatives if you don’t rush. And I don’t see any reason in your story to rush.

Let me tell you what we do. We borrowed some money for a 5 years period to buy a piece of land in a region close to our hearts. Thinking back now I see we could have just saved the money we pay for the monthly rate and buy years later, but now what is done, is done – no regrets. We are close to finishing the payments for the land.

What next?

We have monthly payments for our car which will end in a year or so. This money will go into savings when the car is paid for.

At the time we will finish paying for the land, we will have good savings (if nothing unexpected comes, good or bad).

We plan to build our own little cosy house! This is such a dream for me! My own house and some land to plant and play.

***

Aldo your situation is not exactly like ours, I still see similarities. We have one kid and one on the way – you don’t. We are immigrants in Ireland, you are one ‘home’ and one immigrant. We are planning to go back home one day, you are ‘home’ already as you both decided. I desperately want a garden, so are you. We are still paying our debt, you are debt free. I want a mortgage free life, so are you.

I am ready to make big sacrifices NOT to have a mortgage, but to have a house, no matter how small and simple! I give up all the luxuries in the modern house for a fire heated house, with all the smoke that comes with it. Don’t need fancy furniture or fancy bathrooms or kitchen. Basic works perfect for me, if it comes with no mortgage ) .

My plan is to save enough money to buy basic materials to build a little cosy house, than take 3 months unpaid leave in summer and go back home and build that house with my own hands, helped by my family and friends, whoever wants to get involved in any way. In 3 months I should have a litle house.

My plan sounds a bit too ambitious maybe, but I am determined I’ll have it done in 5 years.

I though I would share it with you because you asked and I totally understand your mortgage phobia as I have it as well.

Here’s some research for you if you’re interested in how a house can be built with 3000€
http://www.simondale.net/house/

I must admit Simon’ little house started my desire of building my own.

Have a lovely day,
Maria

Definitely have an emergency fund for at least 6-8 months of expenses. I don’t know about France, but over here, it’s a good idea to put 20% down payment & get 15 year mortgage. If you’re planning on staying for a very long time, there should be no reason for you not to buy; especially if mortgage is the same as rent.

Have fun house hunting!

I think the key thing is to love the property & house behind the mortgage. AND, to honor the old-school real estate rules – don’t get in over your head, and forget trends. I bought a condo at the top of the market that’s held it’s value nicely while many around here have tanked – because the location is fantastic for the price, and it’s a charming old building, and people dig that here in Boston. It’s too small for us now, and we’re selling, but at no loss. Because we stuck to what we could afford and to what we knew OTHER people would like, too, when we went to sell it.

If you can find a place you love and can afford, a mortgage is a decent trade off for the privacy and autonomy that owning provides.

First of all buy less home than you can afford, but that you can live in. You live a simple life so I can see you buying a smallish home. Not sure what houses are like in France. If you take out a 30 year mortgage plan to pay it down in 20 (do the math). If what you pay in mortgage (principal and interest +10% the aggregate amount needed to be put aside monthly to handle those repairs) is less or the same as your rent, then buy a home.

Making one extra payment a year can do wonders (so long as you have it applied to principal and don’t let it sit in escrow).

Its daunting but its a good debt, and yes there is good debt.

Oh I hear you!
We have zero debt “except” the house, as people like to say. I never understand why this is considered so virtuous. Yes I am glad we only have debt in one area … but the house debt is so ungodly huge.
Honestly, I do not love owning as much as I’d thought. I don’t feel like we TRULY own — I feel like we rent from the bank. I know this is not 100 percent true (it’s not the same as renting, blah blah), but I have serious discomfort with debt too.

If you buy, buy something you love. But don’t get get carried away and buy it without cold, hard facts (value, realistic repairs etc). If realtor pressures you for a quick sale, saying it is a bargain or talks about uniqueness think again. This is very seldom the case.

Small or cheaper can be good but beware of properties that have what a potential buyer may see as flaws. Remember that if your property is too odd it may be harder to sell when the time comes.

Try living in the area for a year before purchasing. That way you will know a bit about the job market, which properties are interesting, if you can find friends. You can keep an eye on real estate during this year noting how quickly properties sell, which ones are desirable, price fluctuations, seasonal variations in availability etc. A new hobby perhaps?

I almost bought in CA — fortunately we were outbid or we would be in real trouble. I have my own theory about buying — that it doesn’t really make sense in this day and age with job instability. So many people I know can no longer count on steady raises and get laid off, and usually end up with lower pay. There isn’t the steady paycheck / company loyalty from our parents’ generation. Having said that, if rent and mortgage are the same and you can still have an emergency fund, it is probably worth it just for the emotional benefit of owning your own place.

We just got an offer on a house we had to leave in a different state over 18 months ago, so I know what you mean! However, if you feel financially and locationally stable, I don’t see any reason not to get a mortgage. Imagine what a great feeling once you pay that house off and have “free” housing!

Don’t fall into the traps of thinking there is “free” housing. Or that if rent and mortgage are equal you may as well buy.

Consider repairs, taxes, insurance. All can be costly and can rise at any time. Repairs can come at the worst time. Of course, rising taxes etc will influence rents, too.

That said, I have bought and sold several properties (with small or no mortgages) and always found it worthwhile – more luck than skill.

I don’t what your personal situation is, or what the housing market is like in France. So can not advice you on whether to go ahead with buying a house.

If you do decide to buy, just try not to be too clever. Be careful about ARMs, balloon loans, etc. thinking you can fix them later. Later might sneek up on you.

Like others have said, take all the costs into account. Be ready for the unexpected. And the time you will spend maintaining a house.

Having said that, I am glad that I own rather than rent. But thats what works for me.

I was like you when it came to buying…a great fear of mortgages and I wasn’t in much debt at the time. My real estate agent told me it would be no different than paying rent except you are building up your equity. You know what, he was right. I have no problem with my mortgage. It is all the other bills and such that I have problems with.

I would say if you make sure you purchase a home where you won’t experience a big bang in a market correction, you will be happy you bought a place rather than rented one.

I’ve also read you want to put down roots. That is where I was at when I bought my place. It has really helped with that too.

BTW, I purchased on one income in an incredibly unaffordable city so I think when you and DH are both working or if you can buy on one salary, if you want to do other things with your time, then you can do that too. That will give you time to continue to live frugally and save and build up your emergency fund again. In a real emergency in the meantime, you could fly home on a credit card. Maybe not the best idea but certainly doable.

I’m with Emily on feeling like you’re “renting” from the bank. I don’t own a home and live in CA. You already know how that is! I’m super lucky, because I have unbelievably cheap rent, particularly for living so close to the ocean.

People have made great points here–repairs, etc. After years of renting, simple things like this just don’t make it on the radar (at least for me). If you use your emergency fund to help with the down payment and then need a new water heater, whaddya gonna do?

Anyhoo, I have a purely insane goal–save enough to be able to buy a house outright or pretty damned close. I have no delusions that I’ll be able to do so in CA, so I likely won’t own for a looooong time, despite the fact that it’s one of my big life goals. But my mother bought a cabin, 3.5 acres (complete with stream running through the front yard!) in a beautiful area of the Ozarks for $30,000 about 10 years ago. Although prices are higher today, it’s still possible to find decent prices. I’m just trying to find a mix of price, area and job availability. Oh, and massive savings!

I’ll take on a very small mortgage, but I agree with Oil & Garlic–if you have job instability, it’s insane to take on a huge mortgage. But since your husband has job stability and it’s cheaper than renting, why not? It doesn’t sound like your mortgage will be huge. Big purchases always take some kind of risk. You moved to a foreign country! You’ve traveled all over the world and had some amazing experiences, some of which folks would consider “risky.” I think you can handle a bit of debt to buy a home. But, that’s just my opinion.

Maria–I found the link you mentioned this week. Isn’t that house amazing?! Just goes to show ya, there are so many options available.

I differentiate between good debt and bad debt. I consider my mortgage good debt because hopefully I will gain equity one day. I also consider my student loans good debt…though sometimes I think otherwise.

Luckily, we don’t have any bad debt like credit cards. I think at the end of the day, it all depends on how much you love your home. If it feels like “home” to you, then you won’t feel so bad making that mortgage payment each month.

Hi there…I would be happier…”free” er if I didnt have this mortgage! Maybe a big piece of land for the animals, garden and the children and tiny house that I paid off. Our house is not big..but the town we live in is crazy expensive…so I am paying my dues. It would be nice, if I could pay it off and not have those Sunday night doom and gloom…”oh I HAVE to go to work tomorrow!”

Just my thoughts : ) and then I keep thinking I will buy a house some day in Bretagne..and I have never been there.

SIF, I totally agree that spending on a credit card when you have money troubles already does compound the problem. There is no doubt about that. I am not advocating it at all but say that it is indeed a possible option in a pinch. Knowing you, you will pay it off before too long because you seem to have that kind of discipline. The others all make good points about what to watch for. My main point is, if you want a house, a garden and roots, and you can manage on one (or two incomes) including taxes, repairs, then by all means go for it. Don’t let the fear of a mortgage hold you back because you don’t like debt. Despite my money issues, I am far better off now with my condo debt than if I didn’t have one. We have a very hot real estate market and my condo has almost tripled it’s sale value. If I wanted I could sell now and easily pay all my debts including the mortgage owing and live in a cheaper town. I choose not to do that `for now. In the end, only you and DH can decide what you are comfortable with in your present circumstances. The rest of us can only tell you what we have done. As one who had a deep fear of mortgages, I can relate to what you are going through. Best of luck with your decision. I am sure you will make the right one.

After the fiasco we are living through, we have decided to save for the retirement home. We retire in 10 years. By living very frugally and saving every penny, we hope to be able to save enough for a piece of land and a used manufactured home on the Oregon Coast, near Yachats.
My personal take on getting a mortgage: if it fits how you want to live your life, then do it. The perks: being able to do what you want, when you want to the house, putting in the garden of your dreams, having pets and children, making memories; all outweigh the possible financial losses you may encounter in the future.
If you live your life afraid of what the future may bring, you are loosing out on the joys the present may hold.

Susan
http://susan-potpouri.blogspot.com/

I would definitely not wipe out an emergency fund for a down payment. We have a mortgage (our only debt), but I’m fine with it because:

a) We’re pretty settled now. I was 42 before I owned a home, largely because I loved the idea that I could quit my job in the morning, load up a U-Haul trailer in the afternoon, and move on if I really wanted to. Once I was married and had a child, that scenario kind of lost its charm.

b) We love our house and neighborhood, and would hate the instability of knowing we could be forced to move if the owner sold the house to someone else. As you say, if we didn’t actually love the house, it wouldn’t matter so much.

c) We like knowing we can do what we want with the house. Well, we can’t grow pot in the back yard, but nobody can tell us we can’t paint it, or we can’t keep pets, or we can’t cut down the ugly bush in front, or we can’t rip out that stupid tiny bathroom and convert it to a pantry.

d) Our mortgage payment is close to what we’d pay in rent for a comparable house. It’s true that we could rent for less – I mean, we *could* move all 4 of us into a 2-bedroom apartment. I might well have done that at 26. At 56 – no thanks, I want a house. I’ve earned it. It’ll be interesting to see how I feel once the kids are grown – I might be back to the 26-year-old mindset.

e) Our jobs are pretty stable – and when we decided to have children, we decided to live a lifestyle either of us could support alone. It’s not that we’re amazingly frugal – but we’re both computer programmers, and we’re paid well. Both times we bought a house, we refused to consider both our incomes in qualifying for the mortgage. We figured each other’s earning capability was our safety net.

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It’s not at all surprising that after so many years of living debt-free, you’d be afraid of taking on a home mortgage.

But if you approach it carefully, looking at all the angles as it sounds like you’re doing, it could be a very good idea, particularly if the housing market there is at all similar to what it’s like here in the states.

I bought my first house 15 years ago. I waited longer than most people to save for a big down payment: 45% down, in fact (or about $95K down on a $209,900 house). But I’m glad I did that because my income has always been relatively modest and I’ve been laid off from work any number of times AND I have remained single, so no second income to fall back on.

The key thing is, i think, not overextending yourself, not buying so much house that you can barely afford anything else and you have little cushion should your income situation change.

I’m glad I bought the place. I can’t tell you the immeasurable satisfaction I get from fixing the place up and doing a variety of gardening and vegetable planting projects each year. I would never put the same degree of care and thoughtfulness into a rented place. The privacy is also a big deal to me.

And the value, even now with sharply lower housing prices where I am, is still 53% higher than what it was when i first purchased. When I sell the place, the gains will be tax-free.

And I’m very much looking forward to paying off the mortgage (balance $60K) in 6 more years, 9 years ahead of schedule, since I’ve been prepaying the mortgage since the very start. The nice thing about this is that when I’m working, I can be more aggressive about prepayments; now I’m out of work, so I’ve stopped prepayments. I like that kind of flexibility. (If I wanted to, I could pay off the whole thing right now, but I’m not sure that’s smart given my lack of a job right now.)

My mortgage has always been my only debt.

What people don’t realise is that you are always paying a mortgage: when you rent, you’re paying someone else’s mortgage!

I say get the mortgage for your own property. I’m debt free apart from the mortgage and I bought a house because I wanted to make an investment in something tangible, not stocks and shares. Like share prices, the value of your house will go up and down, but you still have the house. Make it work for you by getting a fixed rate mortgage and one that you can pay off early without penalties. You can lower your interest rate by paying one or two extra payments per year on your principal.

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I totally hear you! I live in CA myself and the housing market a few years back scared the crap out of me. Luckily, my husband and I knew that the homes were ridiculously priced and didn’t take that leap.

However, with the housing market having corrected itself, now seems like the prime time to buy. But, I understand your fear. Taking your hard-earned (and saved) money and applying it towards a building (that’s all a house really is, right?) is a little scary.

I’ve posted a little bit about buying land, then building exactly what you want. Maybe that’s the route you want to take. It would give you another option that may not seem as scary (though might entail more work and planning).

P.S. Thanks for your comment on my blog about the teaching grant, it was very helpful!

I find this fascinating. A college friend of mine moved to Paris for work. Was supposed to be temporary, but then she met a Frenchie and got married. They stayed in her paid-for apt for as long as possible and saved like crazy, putting something like 200-300,000 euro down on a 750,000 apartment. They said that mortgage policies weren’t as lax as American ones (at the time) and you really had to put a lot down to get approved for a loan.

I think if you’re at the point where you’re putting at least 20% down AND have an emergency fund, AND are able to budget in an extra 2-3% of the home’s value per year into house maintenance, etc. (roughly what’s recommended for home owners in this country) then go for it. With that kind of planning and organization, and if you’re staying put, I don’t see how you can go wrong.

I agree that it makes a lot more sense to buy when your mortgage payment is less than your rent. That said…We are terrified of our mortgage and looking at trying to pay it down within the next year just incase of job loss or a smaller income.

I too hate debt and feared the mortgage; after signing mine I didn’t feel like celebrating, I felt sick! Then I went to my new house which had sprung a leak and I burst into tears.

I agree that mortgages are relatively good debt, but after owning my own home for 4+ years, I don’t know if I’d buy again. Why? I’m not sure it’s worth it. Financially, I think I’d come out ahead renting and my mortgage is the same as rent would be. But then you add in taxes (which are high here), maintenance and repair costs, insurance, a down market, etc. and I don’t see how it will add up.

Other cons (to me) of owning include:
*Stress (I’m not handy, and those repair costs add up and stress me out)

*Time: If I rented I wouldn’t have to spend weekends repairing old windows, painting, doing yardwork, shopping for new water heaters, etc. spent repairing and maintaining the home.

*Lack of freedom: As someone pointed out above, when you own your home you likely can’t move on a whim, get your money out quickly, quick your job, etc.

Everyone’s situation is different of course, as is our reasons for buying. I would only buy again under the following conditions:

-Be sure you’re not buying at the top of a bubble
-Buy less home than you can afford (I did do this) and only what you need
-Budget for a major tax increase after you purchase your home (happened to me)
-Only buy if you want to be there a LONG TIME; 3-5 years may not cut it.
-Be sure you really want to be a home-owner with all the stress and chores that come with it.
-Try to find a good deal on a house
-Don’t count on making money on your house, housing is a gamble.

SIF–I have another confession. The “peak everything” fear makes me want to own a home, so that at least I’ll have a roof over my head. But then again, according to the folks freaking out over the coming oil crash, the powers that be will just take my casa anyway. ha!

I just had to confess. The thought of owning a home makes me feel safer than renting. Dunno how rational that is.

SIF – I love your site and have been lurking ever since I found you via ERE. One thing that never gets mentioned in the rent vs. buy equation is the quality of relationships with the neighbors. When you’re a renter among owners, you’re regarded as a bit temporary. As an owner, it’s somehow easier to forge deeper relationships. I depend on my neighbors and they depend on me. My life is richer for having planted roots in my adopted community.

I admire you to openly share your ideas and thoughts on this subject. As a society, we have gotten to where we think we deserve whatever we want and buy it whether we have the money or not. This is not the way things used to be done. I think we overall live beyond what is necessary and not simply as we should. I do not know if you have heard of Dave Ramsey (www.daveramsey.com), but he is a financial guru that teaches lots of the things you blogged about here. I personally don’t think having a mortgage is a bad thing…very few people could afford to out right buy a house…they are expensive. But having said that you need to have boundaries and stick in with a budget. I rented 9.5yrs before I bought a house that I have now been in for 3yrs. I don’t regret it one bit.

I hope to spend more time reading your blog as I try to live the simple life more than I do now!

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