PURCHASING A HOME OUTRIGHT: EMBRACING TRUE OWNERSHIP

PURCHASING A HOME OUTRIGHT: EMBRACING TRUE OWNERSHIP

Last year, I visited a friend in the US who had just bought a house for his family. When I congratulated him, he pointed to a small closet and joked, “That closet is ours, the rest belongs to the bank.” Like many families today, they would spend the next 25 years paying off their mortgage.

At that time, I owned two rental properties but was essentially homeless, living out of two motorcycle panniers for six months. I started to feel the urge to settle down, ideally in a home that was fully paid for.

Buying a house outright, however, was not easy. Housing prices were higher. Two generations ago, it wasn’t uncommon to save up and buy a house with cash in five years or pay off a mortgage in ten to twelve years. Nowadays, most people need 25 to 30 years to pay off a mortgage with a standard salary.

To buy a house with cash, I had to make some sacrifices. I opted for a country with a lower cost of living. While I could have bought a house in France, it would likely be a rundown property needing extensive repairs. In my chosen country, Guatemala, despite the inconvenience of having constant work around the house, the local workers could complete the necessary renovations within three months.

Buying a house with cash isn’t always the smartest financial move. For instance, my mortgage rate in the UK is 2.29%. In Guatemala, mortgage rates would have been around 8 or 9%, even for loans in US dollars. Given the low rate on my UK mortgage, I prefer to keep that debt and invest my cash elsewhere. This approach allows me to benefit from passive income generated by my investments.

Rather than paying off my mortgage, I decided to invest my cash in various ventures. I own cattle, a coconut farm, a 90-acre land for development, and am considering other unique investments. All these bring in money or are expected to soon, generating more income than my monthly debt repayments. If I had paid off my 2.29% mortgage, I’d need to borrow again for investing, likely at a higher interest rate.

If you have multiple debts, prioritizing your mortgage might not be the best financial strategy. Mortgage rates are often the lowest interest debts, and if not, refinancing could help lower your rates. You could even consider borrowing more against your mortgage to pay off higher interest debts, rather than accumulating more liabilities.

The feeling of owning a home outright is undeniably rewarding. When I bought my house in Guatemala, I could have taken a loan. However, as a self-employed, semi-retired foreigner, getting approval was nearly impossible. It took four bank visits just to open a savings account, without overdraft or credit line privileges.

Ultimately, I wanted to own the home I live in. It’s the first time I’ve owned a fully paid house. I bought my first property at 23, but it was a rental while I rented a different place for myself. In the UK, I lived in a property I owned but most of it still belonged to the bank.

Now, as I renovate my house and add another bedroom, I have the satisfaction of knowing it’s entirely mine. Without rent or mortgage payments, I can expand at my own pace. For now, it’s just an extra room, and I hope to eventually run a small guesthouse with four to five rooms.

This peace of mind does come at a cost, as I could have invested my money elsewhere. Yet, this is a luxury I chose to afford, and it’s worth every penny.

Do you live in a fully paid house? Is it a goal for you, or would you rather invest your money elsewhere?