From Here to Financial Happiness

Day Fifty One Getting Real about Real Estate

I think everybody should aim to become a homeowner, because it's a great way to lock in your housing costs and eventually eliminate them. True, if you own a home, you will face rising property taxes, rising premiums for homeowner's insurance, and frequent bills for maintenance and repairs, and those costs will never go away.

But your core cost – your mortgage's monthly principal‐and‐interest payment – won't ever rise if you take out a fixed‐rate mortgage and, indeed, it should become more affordable as your salary climbs along with inflation and any merit increases. If you opt for an adjustable‐rate mortgage, you'll face a little more uncertainty, but your inflation‐adjusted monthly mortgage payment should also shrink over time.

Even better, once the mortgage is paid off, that'll be the end of a major monthly expense. Renters get no such relief: They face endless and ever‐rising monthly payments.

Still, while owning a house can be a smart move, don't get carried away and buy a ridiculously large home. There is no virtue in owning a house that's bigger than your family needs. To understand why, think about the gain from homeownership in two parts.

First, there's the price appreciation. Over the long haul, this may be slightly ahead of inflation, before factoring in costs. But once you subtract maintenance, property taxes, and insurance, your home's price gain will likely lag far behind inflation – and you could be losing money. The ...