Here is how I learned that owning a house is expensive

8/30/2016


For years, conventional wisdom ruled that buying a house was the smart choice. After all, when you rented you were just “throwing money away,” while when you bought you were “building equity.” But that traditional personal finance fiction is now dying a slow death.

With the current prices of property, you should really consider your options very carefully.

I always wanted to be a homeowner. But I didn't buy my home for financial reasons. I bought it because I didn't want to live at the mercy of someone else or their contract. I wanted to be able to paint and decorate and tear down walls when I wanted to. I believed that renting was throwing money away.

The appeal of a house for me was being in control of my environment. And from stories from friends, you don’t generally get that with renting.

And as much as I love having my own space and owning this home, it has come with a heavy price. When I first purchased my home, I thought the only expense would be the mortgage and a few things here and there. Little did I realise that the home loan is only the beginning.

Municipal service. Water bills. Property taxes and homeowners insurance. Replacing the windows, roof, rotted joists, appliances, fixing plumbing and electrical problems, etc.

The list goes on …

As a homeowner, I learned that I can’t just call the "owner "when my ceiling starts to leak. And I also learned that postponing important maintenance or repairs can lead to deterioration and bigger, costlier problems down the road — not to mention lower property value over time.

Before you buy a house, it’s important to know where you stand. Research has shown that owning a home can cause stress. The amount of work necessary to maintain a home—such as mowing the lawn every weekend or decorating —may be too much for some people.  Others may be overwhelmed by the financial aspect of ownership, such as being tied to a big monthly home loan or keeping up with repairs and other unforeseen costs.

And as much as I love it, my home has been a little stressful at times. So, here is how I learned that owning a house is expensive.

Property Insurance

When I bought my house, I didn't include property insurance. I thought I didn't need it. Boy, was I wrong? About two years after purchasing my house, I forgot to close my tap properly and the water filled up in the sink when I was out for three hours. Slowly, the water piled up until my kitchen, and about one-third of the living area was an inch deep in expanding water.

I used towels to clean up but since my living area is made of the wooden floor, that was a bad move. I didn't realise how much damage I had to deal with so I went about life like it's normal. But I quickly learned that floods and wooden floors don't mix. Hardwood floors cannot be easily taken out and dried like carpet can. After a few months, I realised that the individual floor pieces in my living area where the water was sitting for about three hours, were separating. That was a headache I didn't need.
I called a guy I know to come and fix this for me. He charged me R 1000 and I had to buy the missing pieces for 2050. This was an expense I didn't plan for and it set me back.
It was was a large area to fix. And the handyman did me a huger favour and cut down the price for me as I was complaining bitterly that I didn't have enough money and if I live it for too long, then the area will be worse.

So the next thing I did was do my research on the internet comparing quotes on property insurance. And they were not as pricey as I thought and I wish I had this earlier.

Maintenance

Home maintenance is expensive, time-consuming and hard. One day, I locked myself out of my home. I then used my tried-and-tested strategy for getting into locked doors that failed the first time: I tried opening it again. And once again, it wouldn’t open. I had no keys, no wallet, no phone. All of it was indoors.

I walked up to my neighbour's place and asked for help. We’ve chatted several times in the past and know each other. I explained my situation. She told me about a locksmith and I asked to borrow her phone. I called the locksmith and he charged me R400! He went on to it being a Sunday and told me he was giving me a discount. I was just so tired, so I agreed to it.  And I really didn't have a choice. Even if I did break a window, it was going to cost me. I still can't believe I had to pay that much to get into my own home. Again this was unplanned.

This two stories I've shared are just the tip of the iceberg. I can write a whole book about all the things that I had to fix just to have a beautiful home.

So you see, no matter how you try and care for your home, things will eventually break or you will lock yourself out and have to call a locksmith. Whether it’s mundane repair like replacing door locks, fixing toilet leaks, and touch-up painting, or big-ticket items like new roofs — it all comes out of your pocket.

This is where an emergency fund comes in. Starting a home maintenance and home improvement fund as soon as you can is the wisest decision. You never can foresee when a home repair is going to come up, and since we all want to beautify our homes, having a separate account just for this makes perfect sense.

There are two other things that you need to pay attention to:

Property Taxes
Most South African property owners must pay municipal rates, based on the ‘market value’ of their property. The taxes keep going up and you could even get a tax increase in the first year you own your home. So make sure you have room left in the budget to pay for more taxes.
In the case of sectional title schemes, in terms of the law, each registered sectional title unit must be separately valued and separate rates account sent to each individual registered owner. Rates are no longer the concern of the Body Corporate.

Appreciation/Inflation

This is again something you can't control.  Interest rates happen and no they don't stay the same. And as a homeowner, you are affected by this.  Since many of us finance the purchase of a house/flat/townhouse by getting a 30-year loan from a bank, when interest rates go up, so do monthly bond payments.

As you can see owning a home does not make it free to live in. Home ownership has clear, quantifiable, ongoing costs.

Having said that, owning a home is not a good or bad idea. It has everything to do with your personal situation. Sometimes, buying a home is the smart thing to do; other times, it really isn’t.

So, if you are considering to buy a home, here is my suggestion: don’t take a loan that is ‘just’ within your budget. Make sure that you have a huge down payment. That will help to take the costs down. And also make sure you have an emergency fund.

Remember, your house becomes an investment after 10-20 years and that also depends on various factors like the area you live in and let's not forget interest rates. So if you are happy to be tied to one area for at least 10-15 years, you are good to go.

The important thing is to do your homework and do it thoroughly. Knowledge is power. Knowing yourself and your situation, knowing what you want to achieve is the key to achieving property success. Just don't let the emotional pull of ownership over weigh logic.

Are you a homeowner? What stories can you share with us?

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