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Tiny Homes – Fad or Mortgage Free Way to Live?

Tiny homes have always been around, but lately have become more popular with people trying to save more money.

As the economy comes into its own new normal state, we are seeing a pretty cool movement afoot.  The news media is nothing short of negative upon negative about the economy if you turn on the television or even online.  I see blame being given to Reagan, Clinton, Bush, and Obama all over the news and the web.

Interestingly there is another group who is taking actions of their own to meet what some are calling the “new normal” economy.  I do not care if you think Obama can change things if he gets another 4 years or if Romney is our best bet for the future.  Your ultimate best way to deal with the economy and your future is with your own actions.  You have the biggest impact on your future and I hate politics, so you will not find me blaming anyone.  It is what it is and we can make changes to help us defend against anything that would threaten our family and our finances.

Okay, so where do tiny homes come into play?  Homes are expensive both to purchase and to maintain as any homeowner can attest to. In Maine, you can expect to pay upwards of $200,000 or even more for just an average to below average home.  Some states are much more than this and others are much less.  When you begin to factor in heating costs, electricity, water, sewer, taxes, insurance, etc… the list of costs starts to skyrocket.  Remember buying a home does not just mean buying a home, but you also get maintenance of the roof, flooring, appliances, water heater, home heating, plumping, electrical, and other home repair items.

All those costs can add up to over $3,000 per month in payments and the savings to cover repairs.  Let’s take a quick look at what that means for our family income.  With $3,000 per month needing to be made to cover home expenses, you will need to earn an extra $46,800 per year in your job.  We usually do not look at the cost in this way, but this is a very real expense for most home owners to meet.

The tiny homes are much less expensive in all aspects of home ownership.  If you have a home that is less than 1,000 square feet the heating costs and costs to maintain the space are much less.  The value of the property also drops significantly during tax assessments.  Remember your home gets compared to the other homes in your area.  There are other big savings to owning the smaller homes, such as the feeling the need to furnish every room with nice things.  The tiny homes only need minimal furniture, so you can purchase nice items for the space and be done.

Online there are resources that show the costs of these homes to be as little as $10,000.  As a general rule, you can probably get a very nice place for around $25,000 – $40,000 with land if you do not go to the extreme lavishly with the land or home.  The purpose here is to either have zero mortgage or a very small one after all.

A great defensive tactic if you have equity in your home is to take that equity and purchase your home and land with cash.  If you are really lucky, you may have enough equity to populate your emergency fund with more money or to invest.  If you are a person who identifies themselves with things, this can be a very difficult step to take.  The money saved just means fewer years until retirement for my wife and I and of course needing to make less money, means more quality family time.

Remember a small home built in a nice area you love means your great room can be the great outdoors instead of another room you have to heat, cool, furnish, repair, insure, and pay taxes on.

Have you downsized so you could enjoy more sunsets?

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