Sensible Financial Planning: 5 Right and Wrong Reasons to Buy a House
There are numerous plausible reasons why you may want to buy a house and there are also plenty of scenarios where you could argue that your heart is ruling your head when you are trying to justify your reasons for taking the financial plunge.
When you view a property and the lifestyle it offers at a development such as Julington Creek, for example, and you can see more at roundtablerealty.com about these homes, you can understand the incentive for searching out the property that is just right for you and your family.
Provided you practice sound financial planning and are able to justify why the purchase would work for you and your finances it could turn out to be a smart move.
Here is a look at some of the right and wrong reasons for buying a house.
Rising rents are a real concern
Being a tenant gives you certain rights and a level of flexibility when it comes to being able to move around with greater ease than if you have to sell your home as an owner.
However, that level of portability and flexibility comes at a price and rising rents are a real issue in the current climate.
It can be very difficult to budget your finances with any degree of certainty when there is always the prospect that your landlord might try to squeeze more rent out of you and your only option is to seek a new place to rent if you can’t or won’t pay the new monthly rental amount.
We are in a climate of low-interest rates and if you can buy your own property you can manage your monthly finances with a greater level of certainty if you lock in a deal that means your payments don’t change for a defined period of time.
That level of financial certainty offers a good reason for buying your own home.
Buying a home is such a good investment
It is a widespread belief that owning your own property offers you a path to greater wealth where the property asset you own grows in value over a period of time.
It is also a commonly held belief that renting is like throwing money down the drain. However, it would not be a good idea or reason to buy a property simply because you believe that you can’t fail to make money through a rise in property values.
Historically, property owners, in general, have enjoyed a positive return and there is no question that buying a house can prove to be a savvy financial move, but it should not be viewed as a one-way ticket to achieving a profit.
Timing is everything when it comes to real estate investments and you should always appreciate the risks as well as the benefits attached to real estate investments.
Mortgage rates are affordable right now
Another reason for buying a property would be the fact that we are currently in an environment of low-interest rates but that should not be a reason on its own for buying your house.
Mortgage rates have been much higher in the past and the predictions are that rates will rise again in the future.
If you can negotiate a fixed rate that lasts for the duration of the mortgage term and you have a decent deposit to put down that could provide you with protection from the effects of rising rates and higher monthly payments.
Buying just because mortgage rates are low is not a reason on its own to buy a property, especially if your finances are stretched to do the deal, as a rise in rates could leave you vulnerable unless you manage to fix the rate.
You feel like you are being left behind
If your friends are starting to become property owners you might feel like you are under pressure to follow suit and get on the property ladder yourself.
This would be a poor justification for buying your own house and could even turn out to be a financial disaster if your money situation doesn’t match your property ownership ambitions.
It can be hard to see your friends seemingly making greater progress with their life goals but if you are not ready to cope with stretching your finances to pay the mortgage and all the bills that come with homeownership it would be better to wait until you are more financially secure.
Buying a house when you can truly afford it is a much savvier financial decision in comparison to stretching your finances just to keep up with your friends.
Your life is looking up
Getting a promotion or starting a new and more rewarding job are notable milestones in your life and an increase in your monthly income and prospects can tempt you to consider the idea of investing in real estate.
A typical scenario where it could prove too soon to buy a house would be when you have just graduated and been offered a decent job, which creates a situation where you could buy a property, in theory.
However, you might have debts to pay off if you have just graduated, for instance, and buying a property could put too much strain on your finances at this point.
If you can wait a while and get your finances in better shape for the challenges that come with getting on the property ladder it could turn out to be a smart move. Having some savings behind you and minimal debt levels to service will allow you to cope with buying a home and you will probably know when the time is right.
There is plenty of time to join the homeownership club and you should never feel like it is a race to own a home. Think about the main reasons behind why you are buying a property and if the arguments stack up and the numbers work, it might be that the time is right.