To Buy, or Not to Buy
Deciding to purchase a home is traditionally regarded as one of life’s milestones, but with house prices pushing so many buyers out of the market, when is the right time to buy? There is no definitive right answer or specific date on the calendar, and with thousands of dollars at stake it’s certainly worth doing some thinking and basic research.
One of the first considerations assessing the pros and cons of renting versus purchasing is affordability. So crack out the calculator and do the figures to work out if you can afford to buy. Don’t just consider a deposit, try to estimate the ongoing maintenance and running of the home too.
Top Tips to Calculate Affordability
Remember; utility prices fluctuate throughout the year so don’t only estimate based on one bill. Unless you enjoy DIY, there will be ongoing costs which would usually be covered by a landlord, so make sure you’re not wiped out each month by the mortgage and an emergency fund is still awaiting a rainy day.
As much as we might not like to think about it, circumstances don’t always change for the better. If buying with a partner or friend, you’ll need to ask yourself how stable the relationship is and if the property purchase can survive a break-up. Make a back-up plan as being forced to sell quickly is never ideal.
Financial stability in employment terms is also worth mulling over. Will you still be employed in the same position or higher for the foreseeable future and have good prospects should the worst happen? If buying with other people, consider their employment stability too; can you afford to pay the bills on your own?
Tip: Calculate based on having a 20% deposit including buying fees. If a down payment of this size will eat away all your savings and wipe out the rainy day fund, it may be best to keep saving.
Although a down payment as high as 20% may not be necessary, getting a great mortgage deal is afforded to prospective buyers perceived as low risk. Other factors which will help you get a great rate are a good credit score, stable income, financial reserves and moderate liabilities. It can often be more prudent to put yourself in a great buying position to get the best mortgage possible, even if this takes a few years of laying the groundwork in terms of becoming an ideal mortgage applicant.
Consider: Is purchasing a home your only financial goal for the mid-term future? If you have other goals which will be unachievable alongside a home purchase, you may want to delay. It’s all about prioritizing and really assessing how being a homeowner could affect your life. Have a think about where you want to be in 5 years, if you want to travel then purchasing a home may not be the best action plan. Even if buying in a popular area, you just never know how long a property may take to sell, regardless of all the fees and upheaval associated with house sales.
Good real estate blogs and advice can be found at realestateVIEW.com.au, Right Move, and Realtor, so there’s no lack of information out there for prospective property owners. Taking everything into account can be a real headache, but it’s worth buckling down for a few hours to assess the pros and cons to avoid making any costly mistakes.