Signing up for 30 years of debt may sound scary, as many people resist the idea of being a slave to monthly payments.
But the fact is—unless you’re living with your parents, your sugar daddy, or in an RV, you’re gonna have to pay rent somewhere. Here are 4 tips to consider as you decide where to put those monthly living expenses.
1. Paying rent versus paying a mortgage.
Many people think that paying monthly rent is cheaper than making monthly mortgage payments, which isn’t always true. Either option requires you to have a steady stream of income so that you’re able to meet the payments. While a mortgage may require you to take on debt, at least you’re working towards owning the property outright.
2. Build an emergency fund.
For years, financial gurus have preached the importance of building an emergency fund. That’s because unexpected things happen, and if you have extra money put away, you can get through it. Before you commit to purchasing a home, you have to have a minimum 3-6 month emergency fund on hand to help you cover any unforeseen issues.
3. Bigger isn’t always better.
Before you purchase a home, meet with a mortgage lender to get a pre-approval letter. This letter tells you the maximum amount that you’re allowed to borrow. However, you are not obligated to spend that amount. If you’re hesitant about becoming a slave to debt, consider purchasing a modestly-priced home with a smaller monthly payment.
4. Pay more now, save more later.
Different types of mortgages require different down payment percentages up front. For example, if you obtain an FHA loan, you may only be required to pay 3.5% as a down payment. However, if you pay more upfront, you can save on monthly payments.
I have a colleague in a rural town who’s currently working with a client who was initially very hesitant to purchase a home because he didn’t want to become enslaved to 30 years of debt.
However, he was also tired of blowing $800 each month in rent.
So the buyer put a plan in place to save more of a down payment than the required 3.5% down in order to lower his monthly payments.
As a result, this buyer is now scheduled to close on a home that he loves that is only going to cost him $650 per month.
And if he decides he wants to move on, he can always rent it out.
Helping clients understand the long-term pros and cons of purchasing property before making these important financial decisions is just one way I provide perspective on the notion of being a so-called debt slave.
If you want to go from renting to owning with clarity and confidence so that you can build wealth, control your own environment, and enjoy the comforts of home, comment below or book a call.
About Diane Cohn
Diane Cohn runs a mastermind for anxious millennials who want to go from renting to owning with clarity and confidence so that they can build wealth, control their environment, and enjoy the comforts of home. A prior top-producing Realtor, real estate industry marketing executive, and housing market commentator on YouTube, she has profitably bought and sold property in every kind of market over 30+ years.