I’m here to tell you all about home ownership, why it’s important, and why you should start planning for it right now.
Now, I know what you’re likely thinking: Dear author, I’m a student, why in the world would I need to worry about that right now?
You would have a point. At your age, you’re almost certainly still staying with your parents or a guardian. On the other hand, perhaps you live at a boarding school or an external dorm. Even still, you most likely receive your living expenses from someone else. Among the list of things you worry about, "home ownership" would be at the bottom of the list (if it’s even on the list in the first place).
But pretty soon, you won’t be that young person anymore. You’ll grow up, and thus need to fend for yourself. That’s where home ownership comes in.
But how does owning a home come into the picture? Can’t I just rent?
Well, that would certainly seem to be a viable option… if you have a lot of money to spare. If not, then you had better hope that your rented flat is temporary. Otherwise, it will be more expensive than if you had just bought a home.
That’s the key difference between owning a home, and renting one. Once you’ve paid the cost of your house, you’ll never need to pay another cent to stay in your home again. However, something rented will always require you to pay a monthly fee merely to stay in it, no matter how long you’ve stayed there or how many neighbors you befriended. If you fall into hard times and can’t pay your rent, you’ll be at risk of getting kicked out like a stranger in your own home.
As for staying at your parent’s house? Your parents will likely let you stay for free, but they won’t live forever. Not to mention, they’ll have their expenses to worry about, especially once they’ve become too old to work. You’re going to have your own home sooner or later, but it’d be much easier getting one as a young adult than an older one.
So I hope, by now, that you’ve been convinced of the worth of home ownership. Now let’s into the process of how one actually buys a house.
Houses are an extremely expensive product. Right now, in 2021, buying an average house in the United States could cost you nearly half a million dollars.
Unless you come from a rich family, or won the lottery, you will most likely need a mortgage to buy your home. A mortgage is a kind of loan (a sum of money you borrow, that you promise to pay back later) used specifically to buy real estate (a piece of land and whatever buildings are on that land).
Afterwards, you pay back the people who granted you the loan (known as the "lender") a small amount of money each month until you’ve fully repaid the amount of money loaned to you (plus a small amount of money called "interest", given so that the lender could eat).
That’s basically what a mortgage is. But there are many different types of mortgage.
The most common type you’d find is called a "fixed-rate mortgage", where you and the loanee agree on a fixed amount of money to pay back. There are also "government-backed loans" which are cheaper to repay, but usually entail some other special condition (like being a military veteran). "Adjustable-rate mortgages" are cheaper to begin with, but they could risk getting much more expensive to repay later on. There are lots of choices, each with their own pros and cons.
A particularly clever variation on mortgages that you can use later in life is called the reverse mortgage, where instead of paying back a loan, you convert part of the value of a house you already own into cash. This works by convincing the lender to pay you a certain amount every month. Once you no longer use your house (e.g. you move to another place), the lender will be repaid by money received from selling the house.
Just like the name implies, this is basically the opposite of a normal mortgage.
This could potentially be something you could use in the future, when you’re much older and unable to work. A reverse mortgage could be another source of income to help pay for your daily needs. Yes, we’re really thinking that far ahead.
I know that the topics I’m talking about here seem distant and irrelevant to you right now, occupied as you are by schoolwork, friendships, and club activities. But they’ll come eventually, and much more quickly than you might expect.
It’s a good idea to start thinking about and planning about these things right now, because eventually, these things won’t become so distant and irrelevant anymore. When the time comes to take care of yourself, and you’re prepared, you’ll be freed from worrying about where you’ll live. You can instead focus instead on your goals and hobbies. Your life will proceed so much more smoothly.
You’ll be the envy of your less-prepared peers, that’s for sure!