Notes From The Frugal Trenches – A Downshifting Journey

There is a lot of pressure on young professionals to purchase homes. Renting is seen as throwing money away, or paying someone else’s mortgage. While I agree in principle that it is a good thing if you can purchase a home and I was a homeowner in the past, I do think you need to seriously consider both options when you are thinking about the right choice to make for you. Some of the considerations that are important are:

• Can I afford the lawyers fees, stamp duty (tax), moving costs and any other costs associated with the move?
• Can I afford a downpayment that would cover enough of the property if there was a 15% reduction (or more) in the market?
• Can I afford the mortgage payments on my salary?
• Do I have enough of an emergency fund to cover the mortgage payments and bills if I lost my job?
• If I planned to rent out a room, can I afford the mortgage and bills if I couldn’t find someone to rent.
• What is the market like? Is it stable? Is it decreasing etc?
• What are the risks of losing my job – am I still in probabtion? Are their cutbacks?
• Do I have enough money to cover repairs that may arise?
• What is my life like? Do I plan to go back to school, move etc?

There are several high risk homeowners, including those who have mortgages higher than the value of 90% of their home, those who don’t have savings that could cover the cost of the mortgage if they lost their job, those who have other significant debts not including their mortgage. A lot of young professionals are losing their homes or are in negative equity because they mortgaged up to the value of the home and with the values slipping, well they are in trouble! A lot of those same people are only paying interest only repayments and again, as the values of the homes decrease they are in negative equity.

If I’d of had 50 or 60K to put as a downpayment, I probably would have purchased, knowing that I could ride out the storm. As it is, in my flat I’ve already had 2 major repairs needed and one appliance break. The total cost has been £480. As I closed the door to the plummer, knowing my landlord was footing the bill, I knew I made the right decision for now.

Tomorrow: The result of the May grocery challenge – I can’t believe how low I’ve been able to get my food bill while eating local, organic food!