If you are thinking about going from renting to owning a home, there are a few things you need to consider before taking the big step.
Owning your own home – whether it’s a bachelor flat or a mansion – is a rewarding experience, but it does require some reality checks in terms of the impact it will have on your lifestyle and finances.
Taking the leap will require a huge financial and lifestyle commitment that doesn't come without some sacrifices, we, therefore, advise newcomers to the property market to take some time and make sure they are comfortable with everything involved in buying and owning a property.
Here are the three things you need to do before buying a home:
Create a five- to ten-year plan
Property is a long-term investment and if you buy only to sell a short while after, you are going to lose money. Take the time to assess the stability of your life, and where you want to be in five to ten years.
While there are exceptions, the general rule is that you should be able to live in your new home for at least five to ten years.
Nailing down a plan to the tee will be a hard ask - kids, jobs, and partners do not come with a guarantee of arrival - but you will need to keep the most likely possibilities in mind and provide for them as best you can.
For example, if you are getting married in the next year keep in mind that kids are a possibility in the next five years and plan accordingly.
Get comfortable with your finances
The second aspect of property ownership that we advise prospective first-time buyers, is to get comfortable with their finances. Even as a responsible tenant who always pays on time, the switch to a bond can be quite difficult.
You've always paid your rent on time, but as a home owner you now face rates, taxes, and sometimes levies. Then there is ongoing maintenance that was once covered by your landlord and naturally your bond repayments. Don't forget about insurance costs and building up an emergency fund for repairs - just to name a few new costs that you will have to cover.
While these costs aren't always huge, they can be a little unpredictable, and budgeting for them can be harder. However, you will have to be sure that your budget can take these costs as falling behind on your bond can become a huge problem.
You must be certain of your ability to manage your finances before buying a property.
The good news is, that getting into the habit of responsible financial practices is a great way to polish up your credit rating before applying for a bond – a positive outcome whether or not you decide to go ahead with a purchase. It’ll also help you save up for a decent deposit.
Here is our guide on how to determine how much house you can afford
Get started on your bucket list
While the financial aspect of preparing for a property is one of the biggest tasks, it is not the only one. Now is the time to do all the things you might not be able to do as easily once you own a home.
Emotional preparedness is an often overlooked aspect of owning a home. The financial impact it will have on your life can often seep into your emotional well-being if you are not prepared.
You need to accept that you will not have as much disposable income as before and that for the first few years of home ownership, you might not be able to do all the things you want as easily.
Try to tick off a few bucket list items before you start your home ownership journey so that you don't feel like you are missing out down the line.
Buying a home is one of the most important investments you’ll ever make, so it’s worth taking the time to ensure you’re comfortable, confident, and prepared to make it count.
