Tuesday, December 9, 2014

Debt-free Home Ownership

As the owner of a debt-free home (which took me ten years to pull off, plus some extra help from God), I can attest to the amazing freedom that comes from being out from under the heel of the banks.

The following post is by Simon Johnson of My Permaculture. It's worth sharing.

-David The Good

Debt-Free Home Ownership

“On applying to the assessors, I am surprised to learn that they cannot at once name a dozen in the town who own their own farms free and clear.  If you would know the history of these homesteads, inquire at the bank where they are mortgaged”  – Henry David Thoreau, Walden

Such is the way of the 21st century home owner.  Spelled out by Henry Thoreau all the way back in 1854.  He saw what was happening to the western world back then and today the things he said in Walden are even truer.  Now it is nearly unimaginable for someone to buy a home without getting a mortgage and paying for the next 25 plus years.  This is the norm.
Have you ever looked up the origins of the word mortgage?
mortgage - Old French mortgage, equivalent to mort, dead (< Latin mortuus) + gage,pledge
Indeed a death pledge.  Having a mortgage basically sucks all the life out of you by making it so you have to work really hard every day for a long time to pay the monthly payments.  Usually 25 plus years!
Let’s say you took out a 25 year $100 000 mortgage (most houses these days are over twice that much) at a rate of 6% interest.  That works out to be a monthly payment of $644.31 and a total payment of $193 293.  Holy smokes, that’s almost double the amount initially borrowed!
So just by following the standard operating procedure of today’s society and getting a mortgage to buy a house you can’t afford, you end up paying twice as much for it with the interest payments.  You are paying the bank as much as you borrowed.  What a sweet deal for the banks.
But you don’t want to pay the bank a stupidly large amount of money and still be able to own a home?  You want to be debt free and not be renting a crappy apartment for the rest of your days?  You don’t want to work really really hard for the next 25 plus years at a job you don’t like and live in a beautiful home you fully own?  Absurd!  Crazy!  That will never happen!  Pipe dreams!  Can’t be done!  Is what they will tell you.  But….
It can be done!  It should be done!
How you ask?
The journey to debt free home ownership begins with the accumulation of money.  I hope you didn’t think there was a way to do this without money, because there isn’t (unless you are really lucky).  The world we live in uses money, so we must also use money.  Money is a tool to get what we need/want.  We need a home to live in and time to enjoy life.  We need money to pay for the home so we don’t have to sign up for a ‘death pledge’  and sacrifice all our time paying back a loan.
“A dollar saved is worth a whole lot more than a dollar earned, because we have to earn so darn many of them to save so precious few.” Rob Roy, Mortgage Free
So true indeed.
To accumulate money quickly, extreme saving techniques need to be implemented.  By following a philosophy of living based on providing for your needs and seriously reducing your luxuries, it is easy to save a ridiculously high percentage of your income.  Before you know it you will have a large amount of money saved up and you are one step closer to owning a home outright.  There are many strategies for going about doing this.  You should check out my article on extreme saving and these other blogs which go into great detail on the subject. ERE and MMM.
Once you have a good chunk of money saved up, it is time to go out and look for a piece of land.  There are many factors to think about when buying a piece of land and you should think carefully on them.  Where do you want to live?  How much land do you want/can you afford?  What kind of jobs are in the area?  Will you be on or off the grid power?  Is the land suitable for establishing a permaculture farm?  You shouldn’t spend all your hard saved money on the land either; keep a bit to build your initial living quarters.  There are always costs you don’t factor in to your initial calculations, so having a little extra is always a good idea.
There are a few ways to go about looking for the right piece of land, such as MLS sites, classified ads, or contacting a real estate agent in the area.  These are all well and good ways of getting property, but they might not land you the best deal.  Maybe the way to find the best deal is to go land prospecting.
What I mean by this is driving around the country side in the general area of where you would like to purchase land and look for nice spots and for sale by owner signs.  If you see a place that looks really nice and you might like to live there, go around and start talking to the neighbours.  See if they know who owns that land and if they might be willing to sell you some, or if they know of anyone in the area who might.  Who knows, that piece of land might belong to some old person who wants to see something done with the old family farm, but would rather not sell to an industrial farmer.  You might be exactly what they are looking for in terms of someone to take over their land.  By creating the opportunity for it, amazingly good luck may just come your way and you get a super sweet deal.  If you don’t go out and try you’ll never know.  You can always go back to the MLS sites and real estate agents, but they will almost certainly not bring you super sweet deals.
By talking to the locals you can also begin to establish some relationships and find out in more detail what the area is like.  You might learn some key information, or just make a new friend.  If you happen to get a place near by, these people might help you out with your projects, or hire you on to do some work for them, or be one of your loyal future customers.  Building community is always a good idea and it starts with talking to the locals.
So you saved up a bunch of money, did some prospecting, found a sweet deal and now you own a nice little piece of land which you payed cash for.  No need to get a loan because of your excellent saving and prospecting skills.  Now it’s time to move out of your apartment, quit paying rent and get on to the land you just purchased.  ‘But I need a place to sleep’ you say…
(CLICK HERE to keep reading!)

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At December 9, 2014 at 9:23 AM , Blogger Cristy said...

This is something I have recently been pondering. Thanks for the post.

At December 16, 2014 at 10:35 AM , Blogger David The Good said...

It's truly a better way to live.

At December 18, 2014 at 10:12 AM , Blogger dfr2010 said...

I didn't want to say anything when you first posted (superstition) but we are at the threshhold of being completely debt free. It ought to be reality by Monday morning! We/I started this at the beginning of 2007, as my resolution/goal/project. No mortgage, no vehicle note, no credit cards ... just our monthly expenses. It is finally becoming reality, although it probably has not sunk in just yet.

At December 18, 2014 at 10:58 AM , Blogger David The Good said...

YES! Congratulations. Suddenly you'll be entering a new world of prosperity.


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