Most people dream of owning their own home someday. But you should buy for the right reason. You shouldn’t buy a home simply because you feel it’s what you’re “supposed” to do at this point in your life.
Remember, there can be significant financial consequences.
For one, if you overspend, you can be reduced to being a house poor person, with not enough leftover to pay regular bills or work towards long-term financial goals.
Here are some guidelines on why you should and should not buy a home.
When to own a property…
1. When you’re ready
Buying a home is probably one of the biggest decisions you’ll make in your life. So it makes sense to be financially prepared before you take the plunge.
Bear in mind that this decision is a long-term financial responsibility as you have to service the housing loan on a monthly basis.
If you’re financially and emotionally ready, go for it. For some, owning a home is a milestone as it gives you a sense of security as well as a sense of personal accomplishment.
2. When you want to own equity
The satisfaction from owning a home comes from knowing that you now own equity. Instead of paying a monthly rental, you are paying towards your own home.
In the event you wish to sell the home, you are then able to recoup some of this money to put toward your next home or another big purchase.
In general, real estate is an appreciating asset except in times of crisis like the current Covid-19 pandemic. (Rawpixel pic)
Keep in mind that the housing market can be unpredictable, so there is no guarantee that your house will significantly increase in value. One good example is the Covid-19 pandemic. However, real estate is an appreciating asset in most cases.
If you are lucky enough to pay off your home, you can sell it and collect a large sum of money. You can then take that money and use it for your retirement or use the equity to help you move to a nicer home.
3. When you have a stable job
If you are reasonably secure and certain that you will stay in your current job, it is a good idea to put money down on a home.
Having a steady income will help you stick to your budget, pay your mortgage and spend within your means.
4. When you know house prices will rise over time
A house is one of the best investments you can make. Home prices in Malaysia are relatively stable, with the exception of crises like the current pandemic.
However, experts believe it will slowly pick up when everything normalises. So if you buy a home now, you’ve put your capital in a safe investment where it is likely to appreciate.
Experts believe that house prices will pick up again when everything is back to normal.
5. When you crave stability in your life
Everyone gets to the point where they want stability in their lives. Owning your own home gives you a sense of neighbourhood, schools and community and other amenities that you can call your own.
When not to own a property…
1. When other people are pressuring you
When you reach a certain age or start a family or get married, you may feel pressured to buy a home. Family and friends may be of the opinion that now is the right time to buy a home and “settle down.”
Getting married shouldn’t be the trigger to buying a home. If you’re not ready for such a big financial investment, don’t do it. (Rawpixel pic)
It is vital that you assess the situation for yourself by honestly asking if you are ready to take on this commitment and financially stable enough to own a home.
Until you (or you and your spouse) feel ready to commit to buying a home, you should not do so, no matter what your family or friends think.
2. When you plan to relocate
If your job involves you being transferred often or you yourself plan to be relocated, you’re better off renting rather than buying a new house each time you move.
The rule of thumb is to buy a home only if you plan on being in an area for at least five years. Owning a home also comes with its fair share of troubles. For example, if you lose your job, it can be tough to pay your mortgage or move for a new job.
3. Just because you qualify for a mortgage
Qualifying for a mortgage doesn’t mean you should own a home. It’s a good idea to address any spending issues or debt before you buy a home.
Also, it’s highly advisable to set up a budget before you buy a home so you know how expensive a home you can afford.
Besides, saving a down payment (which is substantial) is a big preparation before purchasing a house.
4. When you’re heavily in debt
If you are carrying large amounts of debt, you should not buy a home. You will struggle to pay your mortgage, and this could severely damage your credit and financial health.
5. When you haven’t considered the hidden costs
Home maintenance is costly. If buying a home is already stretching your budget to begin with, there are chances that you will not be able to cover home repairs and monthly maintenance costs.
Now that you have these guidelines, you can make a more informed decision on whether to keep renting or make the commitment to buy.