Who Really Owns Your Home?
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Who Really Owns Your Home?

An alternative concept in home ownership

We all want a piece of the “American Dream”. So each year, by the thousands we search high and low for the perfect home. When we find it, we trot off to our bank or the local mortgage broker to take out a loan to buy the house and fulfill our dreams. Then, for the next 20 or 30 years, we dutifully make our house payment every month, in hopes that some day we will be able to say, “I own my home free and clear”. But in the mean time, if someone asks if we are a homeowner, we will proudly exclaim, “Yes!” In reality however, do we really own our homes? Not really. We only truly own a home when the last loan payment is made. Until then, the bank actually owns the house.

Worse yet, the bank charges us interest that amounts to 2 to 3 times the actual purchase price of the house, over the term of the loan. If your house was bought for $150,000, depending on the rate and term of the loan, you will end up paying from $300,000 to $500,000 for that house. Worse yet, loose your job or have some other catastrophic event occur in your life that eliminates your ability to pay your mortgage and the bank comes in and takes your home away. So, who’s home is it, really?

Americans have been hoodwinked by the banking industry to believe that taking out a mortgage is the only way to buy a home. And it is, in part, our own fault. We want everything now. We can’t wait on anything and are willing to pay the price to have what we want when we want it. The concept of delayed gratification has become antiquated in the eyes of Americans. This is proven out by the trends of not only paying far more for a house than it is actually worth, but we do the same thing with the new cars we buy. And lets not even get into the hundreds of billions, if not trillions, of dollars of debt Americans have racked up on credit cards. So, when the banks waive the keys to our new home in front of us, we turn a blind eye to the huge sum of money we will actually be paying for the house and gleefully sign on the dotted line.

So, you might ask how you can buy a home without taking out a mortgage. It is an age-old concept practiced for thousands of years, but largely forgotten by Americans. It’s called saving. We all have the ability, just not the discipline to save. The biggest reason is that we all tend to live beyond out means. We must have a nice place to live, a cool car to drive and all the luxuries that our credit can stand. But stay with me here and let me pose a concept to you that may open your eyes to a less stressful and financially secure way of living.

In most households today, both spouses hold a job. Could you live on just one spouse’s income? Yes you could. I’m not suggesting you go live in a hovel, but you also don’t need to live in an expensive apartment or rental home either. Reduce your housing cost as much as you can. Then there is your car. Do you really need a new car? Again, I am not suggesting you buy a 1972 Ford Pinto rust bucket. But in reality, all you need is something reliable that will get you from point A to point B. Also, be frugal with your consumables like utilities and food and you’re on your way.

So, why would you want to live below your means and so frugally? If you can live on one spouse’s income, this leaves the second income available for saving. Lets say, for sake of example, that your spouse makes $25k a year after deductions. This means that in 5 short years, you have amassed $150,000. Now when you purchase that $150k home, you own it, not the bank. You just saved yourself $200k-$300k, plus you have eliminated your rent payment. Housing costs may be more in your area, but it is all relative. The concept remains the same.

Now this may sound over simplified. But honestly, it is really that simple. You may think that you just can’t live on one income. Well, you can. And you can live quite comfortably doing so. Your friends and relatives may give you grief about living in that small apartment or driving the older car while they have the nice house in the ‘burbs and driving their new SUV. But, you will have the last laugh when you own your home outright while they still have 25 years of mortgage payments to make.

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Comments (2)

A good article and makes you think. People should get out the calculator and do some quick math. Plus five years goes by so fast really. Even at seven years or so. It seems like the American Dream is really the bankers dream. Even if someone couldn’t make the entire payment, the down payment would be huge leaving a small monthly payment which beats renting where you get nothing out of the privilege of paying for someone else’s house monthly.

Give advice on the new car. This is the reason why I don't have a another car (my mother is using mine). I don't need it anyway. I work at home and my maid does groceries and my secretary does errands. I take the public transport whenever I go out because I know the cost of maintaining a car can go way much more in my condominum amortizations