I am in the middle of reading Mortgage Free! by Rob Roy and it is fantastic. It guides you step-by-step through what it takes to build a home and
live thrive without a mortgage. I have to admit, the ideas in the book are definitely outside-the-box. As I read Roy's words, it slowly sinks in:
NO MORE RENT. NO MORE MORTGAGE.
What would I do with the money? The possibilities are endless.
Having recently signed another apartment lease for the next year, I began thinking about what my future housing options might be. According to Roy (and any other level-headed person), paying rent is just money down the drain, you're not building any equity. But then the prospect of signing my life away for a mortgage (which is, by the way, old French for "death pledge," mort- death, gage- pledge) was not appealing. So here are eight reasons why I will be building my own home, mortgage-free:
Imagine having another $1000-$3000 left over each month because you didn't have a "payment." What could you do? Would you find a more enjoyable job? Start a business? Perhaps you would grow your guitar collection. We've been brainwashed that we must always have a rent payment or 30 years of mortgage payments.
I remember learning about the phrase "house poor" from a friend with a gigantic mortgage payment. By the time she paid the taxes, HOA fees, principal, interest, and general upkeep, there wasn't a lot of wiggle room left at the end of the month. The thing is, we've been sold the idea that if we can hack it out for 30 years and get that "biggest investment we'll ever make" finally paid off, we'll be somehow set financially.
However even if you pay it off, unless you sell it and move, you can't access the equity (it's not liquid) and it definitely doesn't produce any cash flow for you. In my humble opinion, I can think of a host of more favorable investment options. That is why I believe we should be downsizing our housing investment and leaving cash to invest elsewhere.
If you build a modestly-sized home yourself, you can eliminate the mortgage payment to the bank altogether, pay yourself that mortgage payment, and invest in things like stocks, a new business, or any other investment that will actually generate income for you.
Let's face it: those mortgage payments force many of us into jobs we would otherwise run from. Commutes we despise. Workplaces that can be toxic to our health. Mortgage payments take significant resources to keep up, and when we earn more, we tend to just get a bigger house/payment.
What if that money was at your disposal (or you didn't have to earn it)? What if you could pursue that dream career or go back to school because you no longer owed the bank that large payment each month (or else)?
Along with allowing you to pursue a wider range of vocations, an alternative home may actually allow you to retire earlier as well. I recently read an article about whether a couple should pay cash for a house if they have the money. The comments were a lively discussion of the merits of either course of action. This excerpt from a commenter named Bryan really stood out to me:
In my case I have absolutely no debt other than my mortgage. If my mortgage was paid off I would not go back to work next Monday. I would walk away and take an early retirement. Then I would go work somewhere a lot less stressful. With no other debt I am able to make huge principal payments to my mortgage. But it will still be at least 3 more years before I get the nerve to say “take this job and shove it.”
In Bryan's case, his home mortgage is dictating the job he has as well as when he can retire from it. As someone who is relatively young (I'm turning 30 in a few days), I'm really surprised at the number of people out there that seem to be living and working for their houses. Shouldn't it be the other way around? Shouldn't our home be the calm place in the storm?
But that seems to hardly be the case for most of us. "Get your ass out of bed!" the home seems to say, "my mortgage isn't going to pay itself!"
As a result of your lack of mortgage or rent payments, an alternative home would also allow you a greater ability to delve into travel and hobbies. If money = time, then not having a big mortgage payment each month would not only give you more money to pursue hobbies and other interests, but it would quite possibly give you more time as well.
All of a sudden, ideas for that motorcycle trip, backpacking around Europe, or building that workshop you've always wanted don't seem so far-fetched.
In Rob Roy's book Mortgage Free!, he mentions working for a homebuilder where one day the crew does a shoddy foundation-watersealing job because the mortgage representative is coming to do an inspection (to approve another disbursement of funds).
The waterproofing was supposed to be a 2-coat process with a 24-hour drying period in between. The crew puts one coat on the foundation and backfills it with dirt to complete the process. The banker shows up, signs off, and leaves. Roy says this was not the first time something like that had happened on that crew, and says he ended up quitting that day.
Of course, there are some very good homebuilding crews out there that build with a great sense of pride in their work. But there are too many just looking for the next "sign off." As your own builder, you are also the client, and so you will have a much greater interest in high quality materials and workmanship, paying dividends down the road when things would otherwise start to break down.
Along with higher quality construction, your involvement in the process will almost always yield a higher performance home. Remember, NO OTHER BUILDER feels the direct impact of the design after move-in like you do. You will look with a more discerning eye on everything from window placement to the performance of different wall types. Not only that, but owner-builders typically design what they need, leaving out some of the extra rooms that can multiply the size of a typical home, further reducing initial and lifecycle costs.
The grind of years of debt can definitely wear down your spirit. Sometimes you need a change, but your obligations to the bank dictate otherwise. Don't lock yourself into a situation you can't escape from. It's not worth living the majority of your working life in financial servitude to something that will likely never enhance your financial standing (unless it appreciates beyond all of the associated costs and you finally move out to something less expensive).
What if you could avoid this situation altogether? What if you had more career choices or more time off? What if you had more disposable income? Perhaps your youthfulness would not be whittled away by immovable obligations.
I'm not saying that building an alternative home is all rainbows and unicorns. There will be research, sweat equity, the discipline to build up your cash reserves. But if you can be proactive and know what's involved, you just might save yourself from spending the better part of your working years in financial servitude. And that, my friend, can make anybody more youthful.
Before you think I've gone totally crazy for going against society's mantra that buying a home is the "biggest investment you'll ever make," here's a quote from real estate investment mogul Robert Kiyosaki:
Financial ignorance is so high in our country that we still believe that a house is an asset and a sure way to build wealth. It's not.
Your house is a liability.
Since the lesson still hasn't sunk in for many Americans, I'll repeat here: Your house is not an asset. It's a liability. Very simply, an asset is something that puts money in your pocket. A liability is something that takes money out of your pocket.
Building an alternative home is not a wealth-building strategy. It's a liability-reducing strategy. It frees up your capital and a lot of your time during your working years to invest in something that will actually yield a return that you can access. You might gain the ability to start a business, invest in income-generating real estate, or stocks and bonds.
You may even gain soft returns on things like doing that hobby you never have time for, or more time with your family. Now that we've talked about the WHY of building your mortgage-free home, you may be wondering just HOW to do it. Stay tuned for a related announcement coming this week!