How homeownership can help you gain financial freedom
Heather Deane, a sales VP with a legal services company, spent years moving from city to city, never thinking of buying a house. First, there was the financial hurdle: for years, she didn't have enough money for a down payment. But later, when her earnings grew, the permanence of home ownership still didn't feel like a match for her lifestyle.
"With the job market uncertain, home ownership felt unnecessary and out of my reach," she recalls.
But in 2012, when Deane and her wife relocated to San Francisco, buying a home started to make sense. Together, they had amassed a sizeable down payment, and San Francisco's notoriously high apartment rents made a home mortgage look more appealing than renting. “We knew we planned to settle and didn't want to become an asset on someone else's balance sheet by renting," Deane says. Realizing that the lower housing prices and low-interest rates available to them wouldn't last, they decided to make their move.
A path to get ahead
The gamble and effort paid off. Deane and her wife found a single-family home in Potrero Hill, a hilly neighborhood with beautiful bay and skyline views. The asking price of $899,000 seemed crazy for a house that needed work, but nothing else looked nearly as good. "The price gave me a heart attack," Deane says. "But I sensed that things would pay off—and luckily, they did."
Soon after Deane and her wife closed on their home, housing prices jumped. But thanks to their credit worthiness, they were able to secure a 30-year-fixed mortgage. Their monthly mortgage payment ended up being about 60 percent of what they would have paid for monthly rent.
In the seven years since buying a home, their investment has grown. They qualified for a home equity line of credit, so they were able to replace their roof and swap out their floors, windows, and doors—all without paying out of pocket. The end result has made the house even nicer to live in—and greatly increased its value. "Rather than tying us down and holding us back, our home helped us get ahead," Deane says.
Building equity to build opportunities
In a recent Pew Research study, researchers found that 72 percent of renters in the US hoped to own a home, instead of renting. And a key reason for that was financial security. Renters surveyed in the study said they view home ownership as a path to building equity, wealth, and stability.
Equity is essentially the value of a home minus the amount of money owed on the home. And it can be a pool of money that a homeowner can access for a host of expenses, such as a down payment on their next home. That was the case for Jennifer Bailey, a corporate communication director for a global agricultural company. In 2014, Bailey and her fiancé saved hard to buy into a competitive housing market in Raleigh, N.C. Eventually, they successfully bought their first townhouse for $172,000.
"It needed some love, but those defects brought the price down," Bailey said. The couple bonded over improving their home as they fixed a host of problems, including roof leaks and a faulty HVAC unit.
Three years later, Bailey and her fiancé were married and searching for a bigger home. Three days after they listed their townhouse, they had three offers, all over their asking price. They ended up selling it for $245,000. That profit, combined with their savings, gave the couple the down payment they needed to buy a beautiful home with a yard for their dog and son.
Homes bring a feeling of progress vs. setback
For Bailey, home ownership has provided a path to the lifestyle she hoped for. She says that she might have remained happy without a house, but her home helped build security and provided her new family with roots. “My home gives me an anchor; it feels like a nice, beautiful place to go, an escape after work—and I love having that," Bailey says.
Deane feels that home ownership has increased her freedom. She and her wife can own and live in their house, or they can rent it out and use the income to find a home elsewhere. “If we find San Francisco no longer compatible, we can also sell," she adds. “We have more choices now...instead of less."
D G McCullough is a Wisconsin-based reporter, focused on social and business trends. Her work has appeared in the Guardian, the Economist, and the Financial Times.