My fascination with small housing knows no bounds. The idea of buying a small cheap house to save money is exciting to me. In Cincinnati we have dozens of neighborhoods, but sadly not all of them are created equally. There is about 6-8 neighborhoods that would make the “I could own a house here” rankings. I am not going to list them all, but Oakley, Hyde Park, Mount Washington, and Anderson Township (schools are good) are a few.
That last one sparked my interest in particular when I came across a house during my obsessive search through the real estate listings – a cheap house. Now when I say cheap, I’m thinking “live mortgage free cheap.” A house listed for about 180 days currently listed at $29,900 in a good school district. Here is a public picture of the property.
Not exactly like what I live in now, but I am completely fascinated with this property. I want to first state that to obtain goals such as living without a mortgage – usually sacrifice is needed.
Let me start by saying there are so many con’s to this house.
- The house is very close to a road that I believe is 45 or 55mph speed limit, which would be noisy
- There is no garage just a driveway for 2 cars
- You are extremely close to your neighbors
- The house needs some work, I would guess $15k would make it to my standards, flooring being the largest part of the rehab budget. You could probably get by after tossing $8k in the home.
- It appears one of the houses directly next to you is a rental
- Would lose itemized deduction, but I would argue that is good since that means you aren’t paying taxes and/or high interest
- The lowest level in this house is jerry-rigged
- It has oil heating which I cannot stand, it’s a hassle to refill.
- It’s 2 bedroom / 1 bathroom – I’m currently in 3 bedroom / 2.5 bathroom but it is completely excessive.
But let’s also not forget the pro’s
- Taxes are about $700 a year – that’s right…. a year. I pay about 4.5 times that for my home now
- It’s smaller, but you have to buy less stuff to fill that space
- If you financed 20k and put down 4k (assuming you could get it for 24k) your payment would be roughly: $221
- $122 for interest / principle a month
- $40 for insurance a month
- $59 for taxes
Now that the new taxes from the previous election for my city have been assessed, I pay roughly $900 for my mortgage, insurance, and taxes. Assuming that everything else is relatively constant – the difference between what I pay and what I would pay if I financed the majority of the home would be ($900 – $221 = $679 a month maybe more if insurance is less on the smaller home). If I applied that $679 extra to the mortgage – the home would be paid off in roughly 28 months (2 years and 4 months). If I saved the money instead of applying it towards the mortgage, it could also be said I would have about $20,000 of cash in 2 years and 4 months.
Now let’s go back to my current home. I recently refinanced and my pay-off date is Nov 1st, 2041. If I added an additional $300 a month towards principle my payoff date is Mar 01, 2027. That’s 16 years from now. Furthermore if I applied that extra $300 and the savings towards this cheap little home it would be roughly 20 months to pay it off – think about it, 20 months to live mortgage free.
If I cashed out my currently home and walked with $20-25k – the dream of living mortgage free might be almost within my grasp, but would I be happy with the quality of the area and home – that’s the real question. The thought of paying about $100 a month for your own home has such a strong grasp on me that it is important to not become completely blinded with the price tag.