Posts Tagged ‘Home Ownership’

Another Cost of Homeownership

Wednesday, April 21st, 2010
The Cost of a Dream

The Cost of a Dream

This is a quote from Seth Godin’s blog:

“If you have a steady job, matching your mortgage to your income isn’t dumb. But if you are a freelancer, an entrepreneur or a big thinker, a mortgage can wipe you out. That’s because the pressure to make your monthly nut is so big you won’t take the risks and do the important work you need to do to actually get ahead. When you have a choice between creating a sure-thing average piece of work or a riskier breakthrough, the mortgage might be just enough to persuade you to hold back.”

This should be required reading for our policymakers, as loans from the U.S. Small Business Administration, particularly disaster recovery assistance loans, generally require real estate collateral. If you are planning for contingencies in your working capital needs, you generally don’t want resources tied up in real estate assets. And if you had real estate collateral, your equity is likely worth much less now than it was two years ago, reducing your borrowing capacity, or even putting you underwater. We should give more careful thought to the costs of home ownership, particularly the manner in which it induces risk aversion.