Thursday, February 22 , 2018, 2:35 am | Fair 36º

 
 
 
 
Advice

Karen Telleen-Lawton: Is it too Late for Home Ownership?

Dear Karen: Just when our friends are considering downsizing or moving into retirement complexes, we may buy our first house, or maybe a condo. With both of us on teacher salaries all these years, we weren’t able to afford Santa Barbara’s prices previously. 

Recently, my wife’s mother passed away. She left us a small inheritance that makes home ownership possible. We have mixed emotions about this decision. 

We’ve lived in the same rental house for years and have few problems with it. Of course, we’ve sometimes resented not being able to do what we want or get things fixed when we want. 

Thinking of our own little home puts smiles on our faces, and yet we’re fine where we are.

— Home Sweet Rental

Dear Sweet: You’re right that there’s no obvious answer. What I can offer you are the advantages and disadvantages of home ownership and perhaps some insights into how to evaluate these factors.

The main advantages touted for home ownership are privacy, investment potential, stability, more control in housing costs, community pride and tax incentives. 

Owning a home allows you more privacy because there’s no landlord. If you end up buying a condominium, however, you could have less privacy from neighbors than your current rental house. 

Over the long haul, a house is often a good investment, but only if you’re there long enough to weather economic cycles and average out major repairs.

Some people enjoy tinkering and fixing things, as well as the money they can save doing repairs themselves. If you haven’t been doing fix-it jobs all along, though, it could prove frustrating.

It could be even more frustrating pay for professional repairs if they’ve been “free” for decades.

If you own a home long enough, appreciation may provide more money towards your next residence if you move again, or it may be your inheritors who benefit.

The cost is the flexibility that you’ve had up until now to leave at will. 

Neighborhoods with homes that are owner-occupied are generally thought of as more stable and higher in community pride. As a long-time resident, though, you likely have developed pride in your community.

It’s your call whether you could improve on what you have. 

The tax advantages are real. Tax breaks include:

  1. FHA low-interest mortgages
  2. Fannie Mae and Freddie Mac, repurchases and guarantees mortgages, helping hold down interest rates
  3. Mortgage-interest deduction
  4. Property-tax write-off

Recently, the federal government also allows first-time home-buyers to put down just 3 percent instead of the normal 10 or 20 percent, but the default rate for mortgagees who put down less than 10 percent is almost 50 percent higher than for bigger down payments.

If 3 percent down is all you can afford, you may be setting yourself up for future heartache. 

If you were my client, I would encourage you to first consider your last living situation. Where would you like to be living when you hit your 90th birthdays?

If it’s a retirement home, then you might want to continue to rent until you’re ready for that. Santa Barbara has a wide variety of senior living choices. 

If you see yourselves in rocking chairs on the front porch of a little cottage, maybe with kids or a visiting nurse stopping in to check on you, then it’s probably time to make that dream a reality. 

Bottom line: go with your heart, but bring your brain along too.

— Karen Telleen-Lawton’s column is a mélange of observations spanning sustainability from the environment to finance, economics and justice issues. She is a fee-only financial advisor (www.DecisivePath.com) and a freelance writer (www.CanyonVoices.com). Click here to read previous columns. The opinions expressed are her own.

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