Photo Credit: Lyon Communities
As a rule it’s ideal to buy rather than rent, and to buy when you can first stand to do so. There are, of course, exceptions to this rule in terms of people who cannot afford to buy in their chosen area, so they’ll continue to rent even after they’ve purchased. If you’re looking to buy a home or an investment property, the first thing you have to do is to make sense of whether purchasing something is even in the realm of possibility for your circumstance right now. The best way to work something like this out is to use a borrowing or purchase calculator which will effectively help you by filling in the slots with extra information about buying and may suggest things that you hadn’t thought of yet.
A great many people think the profit in buyingcomes from no longer spending your money on rent,and yet the money you stand to saveby buyingsomewhere is for the most part balanced by the cash you will spend on insurance, maintenance, repayments, and other holding costs which when you’re a renter you just don’t pay. The real money comes from buying a house and holding on to it for a couple of property cycles so that you can see come capital growth and gains.
The Basics
You don’t pay cash money when you purchase a house. If that was how we did it, no one could manage the cost of buying a home. Rather, you make a deposit up front instalment in ‘real’ money (around 10-20% of the cost), and then you get an advance from a bank called a home loan for the rest. You make then make instalments on this loanand pay down the interest and principle of the amount. Homestart can help you to find the right home loan package for your needs.
The higher the up front payment that you’re making, the easier you’re going to find that it is to get a loan. A higher deposit also has the potential to decrease the amount of repayments that you have to make.
What Sort Of Home Will I Be Able To Afford?
You need to look around for something that’s going to appeal to you and also to investors as a possible option for investment if and when you come around to selling your house. You also need to think about how you’re going to cover the holding costs: are you going to be living in the house or are you going to get tenants in to rent it for you? An option could also be to rent the house yourself and also lease out some rooms to help you cover the costs of your mortgage. It’s the smartest way to get around doing something like this – and by thinking with your head and being a bit clever about it you can avoid taking ages to pay off your home loan. Another option to decrease your costs is to subdivide or to buy a duplex house – that way you can live on one side and you can rent the other side out to a tenant. If you can find a property like this it’s advisable that you look into it thoroughly! A great option for any first home buyer as well.
This is just a quick run down of some of the basic things you need to consider as a possible home owner – and the best thing you can do is to keep reading about everything that you possibly can – things like interest rates and learning about types of home loans… this information is going to prove invaluable in the future as you move further into the unknown – but the benefits of home ownership are well worth learning about.
photo by Muffet
I think the comfort of owning a home, especially once you pay it off and only have to worry about annual expenses, is something that is beyond awesome. I have rented for a while due to moving jobs every few years but now that I am settled the yield on owning the place feels great =)