How Good of a Deal is Owning Your Own Home?

 How good of a deal is owning your own home? Great right? It’s the American Dream. I’m certainly happy to have paid off my home, to own it free and clear. Only, I don’t. Not really. And while I have certainly benefitted from owning my home, the folks who have benefitted the most are the bank and Henrico County. Let me explain.

Pam and I purchased our home somewhere around 1998. It was new construction and we paid $258,000, $218,000 of which was in the form of a 30 year loan from our bank. It was the most expensive purchase of our lives and we were at once terrified and thrilled at the prospect.

Over the years we managed to never miss a payment. We also refinanced a couple times along the way. Of course, in the years since we moved in, lots of money has been spent on upkeep and repairs. Own anything for nearly 30 years and maintenance is a fact of life. Luckily, the place never caught on fire, it never got flooded by a hurricane, so we’ve been lucky.

Then, three years ago that magical day came when I made the very last payment to Wells Fargo bank after which I was presented with the deed of trust. The house was finally…mine!

After the celebrations died down, in a more reflective mood I began to ponder just how much interest I had paid to the bank over all the years. It took a while but I finally determined that the bank had earned $227,000 in interest. But that’s not the half of it. I also paid roughly $40000 in home owners insurance premiums. Had my house burned to the ground that would have come in handy, but so far my insurance company has done well. And although I don’t owe any more money to the bank, I will be paying for home owners insurance premiums until I have assumed room temperature. But…even THAT is not all. There’s the question of real estate property taxes. This is a tax owed to your local government if you own a house. It is a progressive tax since it is based on the assessed value of your home which—thankfully—goes up most years. As a consequence, my real estate tax bill has grown through the years. How much have I paid since 1998? Well, that took some time to find out but the answer is a hair under $90,000.

So, when you tally it all up it looks something like this:

Down payment        $40,000

Loan principle         $218,000

Interest                    $227,000

Real Estate Tax       $90,000

Home Owners         $40,000

Total                      $615,000

I’m told by people who claim to know these sort of things that if I sold my house today it would fetch something in the neighborhood of…..$625,000…not exactly Warren Buffet.

But here’s the sketchy part. Besides having to pay home owners premiums forever, there’s another continuing cost that will be due each and every year—my Henrico County real estate tax, which as fate would have it is currently higher than it has ever been—roughly $5,000 a year. So, lets say I live another twenty years in this house and for the sake of being charitable lets say that my real estate bill never again gets increased. Under these circumstances I will pay an additional $100,000 to Henrico County…for the privilege of owning my home. Oh…and one more thing. If I get senile and forget to pay my real estate taxes for a couple three years, the county can confiscate the home from me because they are always the paramount lien on all property in their jurisdiction. Lovely.

Here’s a suggestion. How about if someone manages against all odds to purchase a home, and pays a thirty year mortgage off in full and on time, never haven’t missed a tax payment for an entire generation—how’s about the County stop collecting taxes from that homeowner on that property? Doesn’t that sound fair and equitable? It’s not like the County will have to wait very long to start collecting again. Eventually I’ll kick the bucket and somebody else will buy the house and the gravy train to the County will start all over again. But, shouldn’t 30 years be enough per person?

Thanks for attending my TED Talk.