Innovation Combats Privation

By: Josh Sloan

Each day it appears there is another piece of realty news to make us gasp. It seems hard to believe that home owner's equity is at it's lowest level since the Second World War, but it is and this is according to a report about the Flow of Funds that is published by the Federal Reserve.

This is good news for prospective home buyers, because if they buy at this time, the equity will rise up again, as it historically does, and their investment in realty will be increased in a hurry.The same realty increases will apply to existing home owners, property almost doubled in price over the last ten years - but how to hang in there in the meantime?

Home equity is the amount of wealth that you have accumulated in your home. An example could be shown by using a home that is appraised at $250,000. If the mortgage on this home is for $150,000 then the balance of the 'value of home' minus 'amount of mortgage' equals the equity: in this case it is $100,000.

Equity has been lost at the moment because of the national financial crisis. But it is only a loss on paper, and unless you plan to sell your home, its value will undoubtedly increase in time, as always.

This type of bad news will often encourage the skeptics bring up the 'rent versus buy' question again. There really is no battle here; it is known that it is better to own than to rent. However, in these desperate times it must be appropriate to look into the advantages of owning and buying as opposed to renting.

There is no doubt that the realty market of late has made many of us review this question. Of course, realty is not the problem, the nation-wide realty market is only reflecting the same fact that the nationwide gas increases and food price hikes are telling us: we are not in a period of affluence and growth!

However, many home-owners can close their door at night and feel secure in their own home. If the situation worsens, they know that their home can be converted into a money making business, whereas renters are strictly limited to renting.

If you own your own home you can save literally hundreds of dollars a year by growing your own vegetables. It is so simple, just dig a patch, buy seeds and sprinkle, keep the weeds at bay, water and harvest. Many areas will allow egg-laying hens (but not cockerels) in the back yard, so erect a large wire chicken house and secure a tarp over the top or convert your old garden shed. Scour the garage sales for pedal bikes if you live near enough to work to leave your car behind.

Other homeowners who do not want to give up their homes have thought of such schemes as renting out their garages, renting a room to a University student or offering room and board to a temporary worker from out of town.

Some have insulated their double garage and after the addition of drywall and carpet it can be transformed into a small suite. If you have any kind of business that you carry out from the home, you can often offset some income tax against a portion of your energy bills and mortgage payments.

Homes that have a full basement score high when the times get tough. Home owners can give up their rec room and use their downstairs bathroom to offer rental accommodation. Being able to rent even a room can cover your grocery bill and make other payments easier; a small and temporary sacrifice for a short term solution.

Absolutely none of these options is available to a renter. The rent keeps creeping up, along with the gas and food bills and there is no sacrifice that can be made.

If you do not have the type of home that lends itself to any of these choices, then you may wish to consider a move into a home that does have options. Another way to economize is to down-size into a smaller home with less energy bills that is nearer to your place of work. Also try to minimize your energy bills by line drying, cold water washing and turning off the heat.

Sometimes, mortgage terms can be extended to be paid off over a longer period of time; this makes the monthly payment less. The charge for this is sometimes added onto the final mortgage amount. Ask your lender if you have any of these options available.

Later, when realty is suddenly up in price you can re-adjust if you wish. There may be legislation that we know nothing about just around the corner! A short term struggle is always worth it because at the end of your life you will have a home that is ALL paid for and unlike renters, you can sit in your rocking chair on your own front porch and tell the stories of when you had to struggle through!

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