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Thursday, April 29, 2010

Feel free to copy, there is no copyright on an Anoneumouse montage. (click on image to enlarge)

Home ownership is a con

I don't want to own my own home. WHY...

Let's look at the issue of equity as a component of wealth. Let's say you buy a £100,000 home and put money down. That down payment is 20%. In real terms at the time of closing you have 20% equity in your home.

If you had £20,000 in your bank account, you had £20,000 in wealth. If you move that money to your home in the form of a down payment, you may have £20,000 in wealth as long as the market stays flat. For this illustration, we will say that is the case. You have £20,000 wealth stored in your home. Now what can you do with that?

If you borrow against your home, you erode your equity and your wealth. If you sell your home and get your £20,000 back, then what? You have to live somewhere and living somewhere costs money. The equity in your home is essentially dead. You cannot do anything with it. Sell your house and you reinvest that money into a new home, borrow against your equity and you lose it.

In short, the equity in your home, once in your home, will remain there. Useless to you in real terms. That equity will do something that is quite dangerous, It will cause you to feel wealthy, wealthier in fact than you are and you will then spend money, money that you, in reality don't have.

Oh yes....nearly forgot. the government will tax you on your purchase with stamp duty and then indulge in the act of necrophilia upon you corps with inheritance tax. Not forgetting, in the mean time, if your home has a delightful vista of the church yard where you are to be buried then, the local council will demand a further % of your wealth in council tax.

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