Welcome to Taking Stock, a space where we can take a deep breath and try to figure out what the COVID-19 economy really means for our finances. Every month, personal finance expert Paco de Leon will answer your most difficult, emotionally charged questions about money. This year has forced many of us to reprioritize our finances, and there’s no clear road map for getting through the pandemic yet — but Taking Stock is here to help us figure it out together.
Last time, we talked about what to do when owning a home becomes a nightmare. This week, we asked Refinery29 readers about how they could afford to become homeowners, how much it costs them, and whether they ever regret it.
Do you have a question or dilemma you’d like to see answered as part of Taking Stock? Submit it here or send us an email at firstname.lastname@example.org.
Madeleine, 53, California
Madeleine bought her first house in 2005. At the time, she had $20,000 in savings and an income of $150,000. Since then, she says she’s "had three others bought and sold.”
Her initial monthly payment for that first house was $2,200, and then she also spent money on maintenance and renovations. "On my current house, [I've spent] probably $50 to 70k on renovations, repairs, landscaping," she says.
Homeownership has definitely been a strain on her finances, and Madeleine admits she's fantasized about selling right now. "Once you have a mortgage, it will be the biggest expense in your budget," she says. "It can be a great investment and help you to buy bigger and better homes, but it may keep you from affording travel or private education for your children. And it can be extremely stressful — for example, [it can] force you to stay in a job you don’t like or that isn’t healthy."
"Owning a home has its trade-offs. If you want to live in the moment and have financial freedom, don’t strap yourself down with a home," says Madeleine. "If you're looking for long-term stability for your family and dream of a yard filled with fruit trees, love to entertain, enjoy renovation projects, interior decorating, and are cash-fluid, consider buying a home. Those were all factors in my decision. Like any decision, do not succumb to commercial pressures, like from realtors, or social norms. Do what’s right for you. If you decide to buy, don’t get emotional and buy more than you can afford — the pay-off will be greater in the long run."
Nathan, 51, California
Nathan bought his home in 2017, with $50,000 in savings and a combined income of $120K with his husband. The down payment was $40K, and the initial monthly payment was $1,200. Currently, they pay $1,400.
For repairs and renos, "I've probably spent $20k in total — replacing all the windows, painting the house, buying appliances, putting a new insert in the fireplace, some plumbing and electrical work," he says. "The house was built in 1963, and we had to give it some love."
Nathan hadn't had trouble affording his mortgage and maintaining his home — until recently. "I was lucky to keep my job during the pandemic, and I’m able to work from home," he says. But an unforeseen complication has come up. "Our insurance company just decided they won’t renew our homeowner insurance because of the risks of wildfire. We currently pay $2,000 a year, and according to a local insurance broker, we won’t find anyone willing to insure our home for less than $5,000. We weren’t planning for that expense at all."
Nathan has definitely considered selling. "In just four years, the value of our home, according to Zillow, has increased by 80 percent," he says. "And the homes in our small community are selling fast. With the risk of wildfires and insurance companies that won’t offer coverage or charge a premium for it, now would be the right time to sell. That said, we love our house. Living in the mountains can be tough in winter, but it’s a beautiful area. If we were renting instead of owning, we could just find another place to live, though."
"I guess we just wanted to own a little piece of California," he continues. "We didn’t think of it as an investment or a milestone in our life. There was maybe some family pressure on my husband’s side — his parents and two siblings are homeowners. I was 47 when we bought the house and I had never owned before, because I wanted to have the freedom to live anywhere I wanted to. It had become frustrating to spend so much on rent in California, so buying made sense at the time. I’m not so sure now."
Stacey, 40, Pennsylvania
"I'm your pretty typical elder millennial, saddled with student loan debt and coming of age during two recessions," says Stacey. "In 2016, I was 35 years old. My boyfriend and I were renting an apartment in a major city and trying to save for a house while I was earning $30,000 a year in my postdoctoral residency, and he worked as a bike mechanic. We were planning on getting married but not having a wedding, since we really couldn’t afford a wedding and a down payment for a house. To me, it made more sense to spend our savings on a house than on a big party."
"My mom had different plans," she says. "I’m her only child and she wanted a big wedding. I said, Then you’d have to pay for it. And to my shock she said, Fine. I have money saved for your wedding. My boyfriend and I had spent two to three years scraping together about $6k for a down payment, and then out of nowhere, because now we were going to have a wedding, both of our parents generously contributed, and we used the money both for a wedding and a house."
"I recognize the incredible gift this was, and that not everyone’s mother has a secret bank account for their wedding," Stacey says. "I also found a better job, making about $40k/year, and after being outbid for several houses in the city we looked for a house in the 'burbs near my husband’s work. Although we were pre-approved for much more, we bought a house for $235,000."
Their down payment was about $7,000. "However, closing costs were about $13k, which we did not expect!" Stacey says. "Since we put down less than 20%, we had to pay mortgage insurance, which added $200 more to our mortgage each month, for a total of $1,575. We refinanced during the pandemic and it removed the mortgage insurance, so our monthly payment is now about $1,375."
Although she was able to become a homeowner thanks to a parent's gift, the cost of keeping her home keeps piling up. "Our house was built in 1949, part of the post-war building boom in the suburbs. It’s basically one of those prefab Cape Cods you could purchase from a Sears catalog. It’s cute, but was not built to last," says Stacey.
"My sister encouraged me just to take on one big project per year," she says. "The first year, we put on a new roof for $10k. The second year, we insulated and renovated the attic/second floor for $7k. The third year, I left a toxic work environment and all we could afford to do was remove two trees, which was crazy expensive and sad for a tree-hugger like myself — it was $3k. Last year, we upgraded the electric and put in a few more lights for $4k. This year we hope to get a new fence, which is quoted at $3-5k."
"We also know our HVAC system is about to go, and we have two rotting doors that need to be replaced," Stacey continues. "We have a wall-unit air conditioner that looks like it’s from the 1980s, and if or when we remove it we will need to patch the wall and replace the siding. There are three different types of siding on the house, but we were quoted $24k for the siding and doors to be replaced. I haven’t even started on the bathroom, kitchen, and laundry room."
"Ever since we purchased our house, we've wondered whether it was worth it or whether we should just return to renting. Zillow claims that our house value has increased by $100k over the last five years, so if that is accurate we could make a little profit," she says. "We did look at another house recently, which was equal in price to our home, but it also needed some work. We don’t want to move somewhere and have to start over."
"My husband says he does not feel homeownership is a milestone for him and would have no problem returning to renting," Stacey says. "I do feel home ownership is an investment. Most of my mother’s net worth was from selling her homes. It’s actually where that 'wedding money' came from."
Sylvia, 34, Ohio
"In the summer of 2019, I started looking for a home," says Sylvia. "My rent kept going up and buying a house seemed more cost effective. I had around $20,000 saved for a down payment. I knew it wouldn't be enough for the recommended 20%, but with my budget at $200,000, I could at least put down 10%. I was making $41,000/year at the time."
"My down payment ended up being 10% on my $163,000 home. With closing costs, it was just over $19,000. My monthly payment was $817. It was tax abated for 15 years, so that saved me several hundred dollars every month," she says, noting that her mortgage was less than the rent she'd been paying.
"My home had been recently renovated, so there weren't any improvements. I did have to buy a washer and dryer, a dehumidifier for the basement, and yard-maintenance stuff like a mower, weed-eater. The cost of all that was probably around $1,400," says Sylvia.
Despite homeownership being within her financial reach, though, Sylvia is selling her home. "It's a long, personal story, but I am not happy in my house and I don't want to live here anymore. As it turns out,” she says, “even after a year-and-a-half, my real estate agent expects I will make a profit, which is great. Hopefully, it won't have been a total waste."
Lilly, 33, NYC
"I had been looking into buying off-and-on for about four years. In November 2019, I decided to really do it and found the right place," says Lilly. "My mom died unexpectedly in 2015, so I had inherited around $250,000, as we had to sell her home. By the time I was buying, I had about $175k left over. My income in 2019 was around $120k. I was freelancing and had an earning potential closer to $200k/year, but that would have been if I timed every job back-to-back and never took time off."
"My down payment was around $137,000, and my monthly payment was about $3,000 — $2,400 for mortgage, the rest for my co-op maintenance fees," she says. "In July 2021, I now pay over $3,100/month, because the co-op board decided to raise our monthly fees twice since I moved in, which is supposed to be a rare occurrence that has historically only happened about every 5 to 6 years or so. I guess I just got super unlucky."
"[When I moved in] I decided to remove the big, clunky radiators and noticed the floors were very damaged beneath them. I paid about $300 for removal, then $1800 to repair the original parquet floors," Lilly says. "The day after I moved in, the building sent plumbers into my wall to repair a clog in one of the building's communal pipes. While they were in there, they noticed that when the previous owners renovated the kitchen back in 2012, the plumber didn't properly vent the appliances. I've been asked to go in and do that work. I was quoted $6,000 for the plumbing work alone, then was told they would likely have to rip out most of my kitchen, so it could end up costing my life savings. It's been 18 months and I'm still dealing with back and forth about it, and seeking legal help."
"I always wanted to own a home and I don't regret doing it, even if there are things I hate or dislike about it," Lilly says. "I only noticed how much it means to me when my boyfriend suggested we just leave it empty and rent a completely different space. While I haven't been able to afford customizing much of anything, it's nice to know I can. It's nice to feel like I own a sink faucet or an oven or a refrigerator."
"It's especially important for me because when my mom died, I lost anything that could have resembled a home — plus the rest of my family lives across the country," she says. "Friends in NYC come and go so quickly. Over the last eight years of living here, it's been easy to feel like I'm floating in space without a foundation or reason or anchor. It's nice to feel tied to something, even if being 'tied down' by a home can cause stress."
*Names have been changed to protect identity