Inspired by Geldnerd and Meneer and Mevrouw, I share with you my housing story. There are some ggod lessons in here, and I want to document these for my kids and interested people. I hope you can avoid my mistakes
My story of housing is one in phases. Let me start with the time where I moved back in with my parents after a relationship gone bad.
So, there I was, 25 something and moving back in with my parents. It was the time that I started to look for an apartment to rent with a friend. That search did not give the results we wanted, as we both worked abroad and lacked the time to scout the market.
In parallel, I started a search for an apartment in a nearby city. I wanted to live on walking distance from a vibrant city life. Not in a rural area.
After some looking around – no that much in reality – I found an apartment to buy. It was a apartment in a newly build 7 unit block. Finishing works had to sart, so I could decide on a lot of details. That is nice
I did a few visits, asked the opinion of the parents and decided to buy. The apartment was hot in demand and negotiating a price was not possible. The seller made that clear to me.
Me working abroad did not make it easy to get a loan. Also, I was un aware on how this market worked and got only one quote from my main bank. BIG MISTAKE
I took out a 20 year loan at 4,25pct with the rate to be reviewed each year. The loan also had a cap and a floor: Meaning it could not go above a ceratin interest rate and not below a certain interest rate.
why Did I take this loan? The worst case scenario of this floating mortgage (i.e. as from year 2 have rates that go up and stay up ) was not so bad compared to a fixed term loan.
At that time, I also got a free insurance from the authorities in case of job loss. I am happy to report I did not need that one!
Learning one: shop around for mortgage loans. Heck, even take a day off to do this!
While living there, A few things happened
1- extra cash flow from bonuses went against the mortgage
2- The interest rate dropped and I decided to keep the monthly payment the same, hence shortening the mortgage duration. At that time, It felt like the best thing to do. I was only a little bit into investing, mainly via mutual funds and FIRE was not at all on my radar. Now, I light consider paying less each month at the mortgage and invest more each month.
My girlfriend, now wife moved in. A year later, we decided we wanted a house with a garden so our future children could play in it and we could have BBQs.
Things we did differently
1- we had list of must haves and things to avoid in a house
2- we did go look at 60 plus houses before we found the one we bought
3- we stepped out of a bidding war on a house that was very well located
Things we forget to do
1- Ask the neighbours about the neighbourhood and especially the ones living in the house next to us
2- We did negotiate the price down a little and unfortunately had to overbid a competitor. By building a relation with the seller – also the architect that had designed the house – we managed to win at a price below the initial asking price, and within our budget
Finding the mortgage
With the experience from before, we did shop around for a mortgage and ended up with a 4,2pct 30 year fixed term. This was 2006. Rates were on the rise. At that time, no bank wanted to make us a better offer. On top of that I negotiated on the outstanding balance insurance. We got a 17pct discount.
Armed with a lot more insights in the mortgage market, I stayed vigilant to the price movement in the market and renegotiated 2 twice our mortgage.
The first time was hard. Our house bank refused to put in a decent refinancing. I thus took a day off and went shopping for a mortgage and found a very good alternative I was willing to take.
So, I went all in with my bank and told them I was going to sign the next day with the alternative offer. And I would take all my business with me. Within the hour, I got an offer that almost matched the offer from the other bank. With all costs etc included, over the remaining duration, the delta would be 1K. Acceptable for me. And I was not willing to do all the paperwork to gain 1k over 25 some years…
A few years later, I asked the bank another quote and ended up with a good offer for a 3 year renewable term. That would beat in all cases the fixed term and yearly renewabale.
After the third year, it got reviewed downward and we now pay less than 0,7pct per year. So, we keep the mortgage.
What happened to the apartment?
When we moved out the apartment, into the house, I wanted to sell the apartment. My wife and mother convinced me to consider becoming a landlord. I gave it some thought and hell, why not?! Worst case, I could always sell later.
The first time, I used a real estate agent to rent out the place. The couple seemed decent and both had a job. Bad luck… They broke up after 15 months.
Similar story with the second couple. They wanted to move to their own place, with a garden where a dog could life.
Somewhere in between, after an extra payment and having the tenants paying for the mortgage, I got to own the apartment 100pct! Mortgage free!
Tenants nr 3 got a divorce, had the husband that quit his job living there for a while and not paying. All in all, I only lost 50€.
At that time, the place was about 12 years old and needed repainting and some fixing work. We had 2 young kids and both a busy work and private life. We did not want to do the work ourselves. And also had big plans for our own house and garden.
So, I sold the place.
That was also my search for ways to invest my money and prepare retirement. I came across MMM and others blogs. I had a ahah moment.
It was dual: Damn, I sold a cash flow machine and put the money in the garden vs. there is a FIRE moment.
I do not regret what I did. At that time, with my insights and knowledge of that moment, it was the best thing to do.
Other bloggers that share their story
Meneer en Mevrouw (Dutch)