Buying a home is a milestone and step towards owning an asset that could impact the purchaser’s financial situation for the rest of their lives. While it is an incredibly exciting time, it is important that you only take a step towards homeownership when you are completely ready to do so. Owning a property requires desire, sustainability and a long term financial commitment.
Apart from finding the perfect home and dealing with the often complex process of a property sales transaction, there are a few other aspects that first-time homebuyers need to contend with, such as learning to become a responsible homeowner. There are numerous factors that need to be considered from both a financial perspective and from an emotional standpoint before deciding whether purchasing a home is the right choice at this moment in your life.
Here are a few pointers to mull over before making your final decision:
Are you planning on staying in one place for some time?
Considering that purchasing a property often requires a deposit, bond costs, attorney fees, insurance premiums and maintenance costs, it rarely makes financial sense to purchase a home for a short period. It normally takes between five and seven years before you will see any financial return on your property investment, so buying only makes sense if you are planning to stay in the house for at least that period.
Are finances in order?
While there are buyers who can purchase a property in cash, most of the general population will require a loan from a bank. A potential buyer’s bond approval is highly dependent on their ability to show the necessary levels of affordability. Before applying for a bond, you need to focus on minimising your expenses to create as much expendable income as possible. It is not advisable to take on any other big ticket debt, such as a new car repayment. This will have a negative impact on your ability to obtain the finance.
Obtaining pre-approval through a bond originator such as BetterLife is a great way to gauge how ready you are financially to own property, as well as what you may need to do to get there.
Is the saving in place?
It is impossible to separate homeowner readiness and saving. Apart from the fact that most homeowners will be required to put down a deposit of around 20% the purchase price of the property, there are the maintenance costs, a contingency fund and of course, moving expenses.
Transitioning from a tenant to a homeowner means taking on the full responsibility for the property. If anything in the home requires repairs or maintenance, the buck stops with you. For this reason, it is a good idea to be financially prepared by having a contingency fund in place to be able to deal with any repairs as and when required.
Is the timing right?
Timing is a vital element to homeowner readiness. The best case scenario would be for you to be ready to buy, but also be able to wait if required. If you are currently renting, you don’t want to be stuck with another six months on your lease and lose out on the right home, but you also don’t want rush with only a month to find a home.
Buying a home is a big decision - it is never good to rush into it without giving it the necessary consideration. That said, it is also not ideal to hold back too long and let an opportunity pass by because of not being prepared.
One sign that shows you are ready to own a home is understanding that it is not always going to be easy. In reality being a homeowner takes time, effort and money. However, even though there are likely to be a few challenges you will face along the way, the result is a home that you can call your own.