5 Ways Buying a Home Can Ruin Your Long-Term Wealth

Owning a home is a significant sentimental and emotional investment for a homeowner.

But owning a home is not really a significant financial investment — unless you are a shrewd house-flipper in a can’t-lose housing market.

After all, a home can be a money pit if you don’t know what you are doing. And being a homeowner rarely affords you financial security.

Here are five reasons why buying a home can ruin your long-term wealth:

Mortgage payments

Most homeowners spend decades paying down a mortgage to eventually own their home. By its very definition, a mortgage is a loan.

One can’t aspire to financial security when paying off significant debts for years or decades at a time.

The average 30-year mortgage comes with a monthly mortgage of about $1,300. And the typical 15-year monthly mortgage payment is about $1,750.

Depending on the local cost of living, mortgage terms and housing market volatility, your mortgage payment could be double or triple the average.

Significant upfront costs

Aspiring homeowners must pay a variety of costs and go into long-term debt just to own a home. And those costs only begin with the mortgage payment.

The average homeowner buys a home worth anywhere between $200,000 to $400,000 via a mortgage.

And there are various closing costs that must be paid before a mortgage can be finalized. Various closing costs can include the cost of an inspection, value appraisal, origination fees, title search, legal fees, credit report search, and so on.

The typical closing cost can be the equivalent of 2% to 5% of the home’s value.

That is a lot of money to pay upfront decades before the home is even fully owned, if ever.

Continuing maintenance costs

Owning a home requires continual monthly and annual maintenance costs. And these are continuing costs that go far beyond the mortgage payment.

The average American homeowner spends over $9,400 on annual maintenance costs.

These costs include repairs and regular aesthetic maintenance, utilities, homeowners insurance, and property taxes, to name a few.

And maintenance costs increase relative to local cost of living standards. In the high-cost housing market, coastal cities like New York City, Miami, San Jose, or San Francisco, annual homeowner maintenance costs can be as high as $17,000.

So, on top of paying a mortgage, you will have to pay thousands or tens of thousands for maintenance costs for years or decades. That is not financial security.

Shorter terms of homeownership

The average homeowner owns their own for anywhere between 8 to 13 years according to a recent National Association of Realtors study. In fact, homeowners in high cost of living and population-dense metropolitan cities are less likely to own a home for a decade.

That means many homeowners could end up getting foreclosed or selling a home at loss years after buying it.

Home depreciation

The typical home may financially depreciate by 3.6% annually without regular maintenance. Homeowners will have to invest heavily in repairs and façade rehabilitation relative to local housing market prices in order to resell.