28 May 2019 22:02
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Last summer I had the joy of paying my mortgage off and owning my home free and clear. It’s the accomplishment many homeowner’s dream of and I accomplished it by age 50. It wasn’t accomplished through anything special, I bought a house I could afford and never moved or refinanced. There was no secret sauce to paying off a mortgage if that is what you were looking for but it is a reflection my saving and investing style.
The achievements I made with my investments where I now generate a consistent monthly dividend income (albeit 95% tax deferred) was done through decades of consistent savings just like my mortgage was paid off through decades of consistent repayment. Unfortunately though the cost of home ownership is far from over after the mortgage is paid off.
For those not aware of my background, most of my adult life I was the single income supporting a family of five. Money was always tight and we made sacrifices (no big faraway vacations, used cars, etc..) to save a little each month and to keep a house with a yard to raise our children. Much like our sacrifices with living expenses & savings we also made sacrifices with home improvements. When we first bought the house I made very tactical improvements that were needed to sustain the house like a new roof, furnace, central air conditioning, flooring, and upgraded a bathroom which suffered from water damage by the previous owner. The kitchen, which is typically the first upgrade a homeowner tackles, is something I avoided due to the high costs.
At the time we bought our home the kitchen was a tacky early 1970’s design. I t was ugly but functional so we chose not go into further debt and live with it. Flash forward 23 years later and that 1970's kitchen is starting to see its end of life. Cabinet doors are having issues, the old vinyl flooring is cracking and wallpaper is starting to peel back. The biggest expense I have been avoiding all these years is finally catching up to me. That said in the next 5 years I will be gutting & remodeling my kitchen and an adjoining hallway. All said, I predict the total costs to be near $35,000. But the expenses do not end there.
Remember those “tactical” upgrades I made when first bought my house, well they are coming up on their end of life and will need to be replaced in the next to 5 to 7 years. At a minimum I am looking at a new roof, furnace, and central air unit which will add another $14,000. My bathroom, after taking punishment from 3 kids, will need to be redone in about 7 to 10 years adding another $5000.
All of this work gets chalked up to home maintenance and if we tally it up that is a whopping $54,000 over the next 5 to 10 years and this assumes I am doing some of the work myself. There are without a doubt pluses and minuses to owning a home and this is obviously one of the big minuses. Sad part is I own a small home. What would these costs be if I owned a larger home? The ironic piece is if I break up the remodeling costs to a monthly cost over the next 10 years it is equal to the monthly mortgage payment I just finished paying off!
Looking towards a positive, one benefit I will have are my children. The oldest graduates from college this December and will get a full time job and my other children will follow suit every 2 years after that. In theory, after 6 years I should have no expenses for children which should free up $20,000 a year in expenses (yes kids come with a price). I might be counting my chickens before they are hatched but for now I will continue to invest a large portion of my extra income generated from no longer having a mortgage on the hopes my expenses will be dropping dramatically over the next 6 years to cover the expense of remodeling.
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