The modern slave: the one with a big house, therefore a big mortgage

Last August, I was able to meet many of my friends. Some of them I haven't seen for a long time.

While talking to them, I noticed the have 3 things in common:

1. They all bought a house
2. These are very big and beautiful, thus expensive

And lastly, they all need to work hard to pay for the mortgage...

It appears that their monthly mortgage is big (reaching half their monthly salary, sometimes up to 75%) and will last for 20 to 25 years. This gives them no choice: they must work hard and long to pay for it.

They are all in their mid 30s. If you add a 25 years mortgage, they'll be able to pay it off when they reach 55 years old which is to me, very long time.

In the mean time, they have to maintain this big house and these maintenance costs are substantial (especially when you have a big garden and a swimming pool).

As Robert Kiyosaki says it best: "your house is not an investment. It's a liability" and I really believe in this saying because I won't like to be obliged to work forever to pay for a house I barely can afford.

In contrast, this is my point of view towards house ownership:



1. House ownership is overrated. I believe that owning a house makes sense only if you plan to live there for a long time. If you are young and you are not sure about where you'll live in the future, stay away from ownership.

2. In many cases, it makes more sense to just rent. When the real estate market is overheating, the price of the house is not representative of the rent you can expect. If it takes more than 15 years of annual rent to cover the price of the house, it is better to rent.

3. Maintenance costs are expensive. For those who owns a house, there's always something to repair or repaint. These underrated costs can become a burden, especially when your monthly mortgage is high already.

4.  Buying real estate just for bragging rights is not worth it.

5. Obliged to work during your best years so you can pay for your mortgage is not the best strategy. You might lose the opportunity of retiring early or getting a better position in an other city or country. Also, you'll have little choice than keep working to pay for it.

6. Selling a house is hard and expensive. There is a myth that houses always gain in value with time. Well, it is more complicated than that since it appears that real estate value just follow inflation. Worst than that, it is often hard to sell the house at your target price and the sale process is very expensive since you have to pay for taxes, brokerage fees and other expensive fees.

In my next post, I'll describe on strategies to make real estate ownership worth it.