Dear Bloggers,
We have lived in our house for almost five years and my wife wants to move back to the little village on the lake were we once started as homeowners. The lack of houses is making the market going wild and it got overheated. Although homeowners that want to sell have to bring their prices down as the energy market has become impossible for many Dutch families. Something to consider for the coming years. So we need to hold our horses for a while until they realize that we are not going to buy that far over budget.
Before buying a home, figure out how much house you
can truly afford, including a budget for maintenance and repairs.
I have discovered that I was house poor soon after we
bought this house in 2018.
Above the new situation as the hedge was a fire hazard and the garden was fully out of shape.
Heating the poorly insulated home was also more expensive than we thought it would be. To make ends meet, the budget had to be extended as 52-year-old we had to take out a home equity line of credit.
“I quickly found that I was spending at least half of
my small €46,000 income at the time on being a homeowner,” I never tried this
before. “It turned into the home owning me, as opposed to me owning the home.”
While buying a home can be a sound investment, it can
also become a financial burden. Here’s how to think about your housing budget
so that doesn’t happen to you.
Getting ready to buy a home? Hire a financial advisor
that does all the math for you and sees into the fact that there might be extra
costs on remodeling the house. Constructional things can cost a lot of money.
Total renovated the entrance hall and the staircase has been replaced
What does it mean to be house poor?
Someone who is house poor spends so much of their
income on homeownership — such as monthly mortgage payments, property taxes,
insurance and maintenance — that there’s very little left in the budget for
other important expenses.
Being house poor can limit your ability to build up
retirement or other savings, pay off debt, travel or enjoy life. Yes been
there, done that and got the T shirt.
“I did not have the money for going out with my friends anymore, going to restaurants, or enjoying time as a 50-something-year-old.” It was an extreme time to survive “I was selling all kinds of stuff on Marktplaats, trying to make the heating bill payment.
A total rebuild of the kitchen required a new electrical system due to induction cooking
In fact, 28% of recent home buyers say making their
monthly mortgage payments will be among their biggest money stressors for the
next two years.
Budget before you buy
Before shopping for a home, it’s important to figure
out how much house you can comfortably afford, which may be a different number
from the maximum mortgage you can get approved for.
“A reconstruction calculator is definitely a good
starting point for helping to determine your housing budget,” says Gerrit who
is a certified financial planner. “However, they also require that you have a
strong understanding of your cash flow today — what income is coming in, what
expenses are going out and what amount you are saving.”
On the top picture you see the new electric system on the lower picture the old one
One rule of thumb is that you shouldn’t spend more
than 28% of your gross monthly income on housing-related costs and 36% on total
debts, including your mortgage, credit cards and other loans. This is 64% in
total
everyone’s situation is different, and the rule
doesn’t take into account the need to leave room in your budget for things like
furniture, as well as maintenance and repairs. Plan for upkeep and upgrades
The cost of unexpected home repairs and ongoing
maintenance can take you, in particular, by surprise. Even a house that was in
very good condition on closing day will inevitably need some big-ticket fixes
over the years.
I realized just after moving into this new home that
the roof had a leak and the draining system needed some work. So I got a roofer
over to fix the problem and this took about €4000 out of my budget for
remodeling.
The old living room
41% of people who have purchased a home in the past 12 months say their biggest money worries in the coming two years will be affording home repairs and maintenance.
The new living room
Saving 1% of the property’s value is a good starting
point for maintenance expenses per year.
But, you may need to scale up to 2% of the property’s
value based on the age and condition of your home, ours is from 1966, repairs
you have already made, and the life expectancy of housing components like the
roof or furnace.
Tips to avoid being house poor
Even if you plan properly for a home, it’s possible to
become house poor if a job loss or medical emergency leaves you unable to pay
your bills.
In 2018, when we decided to purchase a home with my
wife, I knew we wanted to do things differently. I Thought that we as a couple
bought our “dream house” after living so frugally for nine years that we could
pay off our debts and save up a 20% down payment. Even so, we took out a
smaller mortgage than we could have qualified for. After two years of
renovating our house to a home again we ended up in extra costs of about €100.000
We took the electrical wiring down and rewired most of the house. All the
draining was renewed and also the water and gas lines. We took the wooden floor
out as it was rotten and got a foam
concrete floor with underfloor heating a total new heater with new high
efficiency radiator panels upstairs, we placed insulation between the floors and
still there is some work left to do in the coming years.
“When you're absolutely sure you want to live
somewhere for the long term, buying a home with the proper down payment and an
understanding of the true costs of homeownership can be a great experience,” I
am having a bit of experience through the years. “I found that with my third
round of homeownership.” And we are getting ready to take step four.
Someday, sometime and somehow the new adventure will
start soon I hope
The Old Sailor,
