This past weekend marked the end of my 5 year journey. It all started a little more than 5 years ago. At the time, I was living with my parents and my grandma in my parents' house. I was working at a steady job. My mom was complaining about the house being too small and too cramped. My dad wasn't bothered, but he was fine with us looking at houses, just to appease my mom. At the time, the housing crash was still recent, and the housing market was still recovering. On the positive side, prices were reasonable. On the negative side, I didn't have any expectations of it being a good investment. But, for the trouble she went through in raising me, I could buy a larger house for my mom to live in. It didn't have to be an investment that yielded abundant return. I would be fine as long as I didn't lose money. Thus, we went with our family friend to look at houses.
At the time, everyone we met who was trying to sell us a house was telling us how the housing market was quickly becoming a seller's market. We weren't really pressured. If we didn't like anything in the house, we would move on to the next. When, finally, we settled on a house we all approved of, I put in an offer, $10k below the asking price. The realtor, our family friend, warned me not to do that, but for me, I wasn't desperate to buy that particular house. I suppose, with God's blessing, perhaps, my offer was picked. All of a sudden, what was just a hypothetical situation became very real. We needed to plan how we would pay for this purchase - the largest I have ever made, by orders of magnitude.
I still remember that afternoon. My dad, being very conservative, was worried. However, I did the finances. The plan was that with the combined incomes of my dad, my brother (who was in Austin), and I, we would be able to pay off the house in 2.5 years, with a decent margin in case any of us lost our jobs. Thus, the risk wasn't that high. If we excluded my brother from the calculation, it would take about 5 years. If it was just me, I calculated about 7.5 years. Thus, it was the boldest move I've ever taken, but the math seemed fine, so we committed. My biggest reservation at the time was that I had never been consistent about doing anything for much more than 2 years. This would test my discipline and perseverance.
Initially, the burden of realizing that I had just gotten myself into hundreds of thousands of dollars of debt weighed heavily on me. It was actually the first time I had ever been in debt, and it was a new experience. I learned that I hated the feeling, and hoped to never repeat this decision again, despite it working out. It was a feeling of bondage. It really restricted my choices and options in ways I could not have imagined previously. I had to give up opportunities, because I couldn't take on the risk, due to this new obligation. But, most agonizing of all was the feeling that I could be paying my entire paycheck, and the burden would not go away for a long time. Basically, I was in it for a while, and I had to be patient.
I suppose, I really have to thank the Lord that the last 5 years has seen an economy that has been extremely peaceful. I never missed a payment, and the whole thing passed by with no drama or disputes. While I did live paycheck to paycheck at times, especially towards the end, as I sprinted the last leg of the mile, these risks did not become problems. My life continued as it always had. I even actually started eating out more than before, and socializing more.
To stay on track, though, I did ultimately make the decision to live within a conservative budget, dedicating as much as I could to paying off the mortgage as quickly as possible. I'm pretty happy to say that in terms of how close we stuck to the original timeframe, I came in pretty close to our plan. We stuck to the plan. The plan was sound, and we executed it well. And now I'm free. It feels good. I can finally get back to rebuilding my savings, which have been just about exhausted.
There's a few gotchas I did experience, however, along the way, which I'd like to note. Frequently, when we make plans, we don't account for these things.
A year after I signed on the dotted line, my brother also got a mortgage for a new house in Austin. This put us at significantly more risk, as two mortgages is much harder to handle than one, given if any of us lost our jobs. Fortunately, none of us did. But, we did make a contingency plan in the event that either of us was running into trouble.
Interest was one of my top concerns when I signed up for the mortgage. Fortunately for me, my mortgage came with an extremely low interest rate, by historical standards. This meant that the total amount of interest paid ended up being very reasonable, as can be seen from the chart. In fact, the taxes and insurance became the much larger cost over the entire time period. Unfortunately, this expense is ongoing.
In aggregate, the original cost of the purchase ended up being only 80% of the total. Taxes and insurance was the biggest gotcha, which ended up taking a nontrivial 10+% of the total. Interest ended up being quite reasonable, at only around 5+%. Of course, I've excluded maintenance and bills. If those were included, they would easily have surpassed the taxes, insurance, and interest. Owning a home isn't cheap. In fact, after actually calculating the costs, living in an apartment is a surprisingly good option. Taxes and insurance, when combined and divided into monthly amounts is only slightly less than renting an apartment for a single person. If my plan was to stay single, it'd probably be better to rent.
The atmosphere nowadays is completely opposite of what it was 5 years ago. It's back to the heyday, where people are tripping over each other trying to buy houses, buying with all cash at the asking price or more. What seemed at the time like a risky move now seems like it was a genius move. It's really hard to foretell what the future will hold.
Finally, my mom has always been very proud of the fact that she had bought her first house by the time she was 30. While I wasn't able to quite match her feat, I got pretty close. It was stressful, so I'm glad it's over.
August 2, 2018