A common question that vfx artists ponder is whether or not they should purchase a home. My answer is absolutely. If and only if you have the cash to purchase it.
However, the more correct question to ask is should you own the debt in the form of a mortgage to buy a home. My answer is absolutely not. There are many compelling reasons not to own a mortgage even though interest rates are at historical lows:
- Home values are dropping, and will continue to be flat for probably the next decade.
- Renting an equivalent house is significantly cheaper even with tax breaks for mortgages.
- Real estate has generally always been a bad investment.
- As interest rates go up, principal home prices may be forced to go down.
Also, from a vfx perspective, what is the feasibility of owning a mortgage when you work project to project and your next job could be thousands of miles away?
Along the same lines, if you own a mortgage, you give up negotiating leverage in the sense that you may be tied down to a particular job location even though a better opportunity may exist in a 2 hour commute away.
I decided to take a look at what some senior vfx artists paid for their mortgages and what they ended up having to do in various situations:
- 2100 sqft house purchased for $800k. Sold for 1.2 million.
This senior artist sold at the peak of the market and made out like a bandit. Those were the glory days of real estate.
- 1600 sqft house purchased for $750k. Now worth $620k.
With such a huge mortgage payment, this senior artist cannot afford to have much of a gap in between jobs and will be in a precarious situation if they get laid off. This provides a leverage opportunity for the employer to offer no raise in salary. Cutthroat? Yes, but if employers have the leverage, they’ll do it.
- 1900 sqft house purchased for $850k. Now worth $650k.
This senior artist was not as lucky. With a mortgage deep underwater, the artist unfortunately lost their job and had to move overseas. They chose to do what many would do: Rent the house out for a much lower price than the mortgage payment, and use that money to make up for the cost of living overseas. This may open up a can of worms if you can’t find a good tenant or the cost of living ends up being much higher overseas.
- 1100 sqft house purchased for $675k. Foreclosed and sold for $550k.
This senior artist also lost their job and tried to sell. After being unable to sell and moving overseas, they decided to default on the loan. While their credit may be ruined, it probably was the correct thing to do given that the artist was going to leave the country.
So what do I advise a vfx artist do?
Save your money and keep saving until you can buy a home to live in with straight cash. You’ll probably be saving until you are 45-55 but in the mean time you can just rent and avoid precarious mortgage situations like the ones above.
Once you do buy your home, you could potentially leave the volatile vfx industry and adjust to a lower salary that offsets for the fact that you won’t have to pay for rent or a mortgage. The advantage of buying a home with a mortgage is you get to have the home now, but you end up paying twice as much for it over 30 years with interest. With a volatile job market, it’s easier to end a lease than to end a mortgage.