It is a dream for most people to be homeowners. Not only because it’s a lot more convenient to have all your belongings stationed at a place the way you like them to be; the common primary reason why home owners purchased a house is very often because one would like to have a place which can be called their own.
The practical reason of course is because purchasing a home can save you more in the long run. Purchasing a home is 37.7 percent cheaper than renting on a national basis. Although in individual markets that can vary a lot, let’s face it: buying a home is a huge commitment. So, before you take the plunge, it’s important to make sure you’re ready. To decide if it’s better to rent or buy, you’ll need to ask yourself a few questions first.
1.CAN I AFFORD TO BUY A HOME?
This is the most important determination. Start by taking a close look at your financial health and status. There are a number of affordability calculator online that can give you rough ideas of your buying power based on your income, monthly debts and how much you have saved for a down payment but a healthy general rule of thumb is try not to exceed 30% of your monthly income for the average monthly mortgage payment.
Once you get an idea of how much home you can afford, you’ll want to meet with a mortgage lender — which could be a bank, credit union or mortgage broker — to explore your financing options. If you can, get a mortgage pre-approval — a written commitment from a lender to provide you with financing up to a certain amount.
Also, remember that the recommended down payment is 20 percent of a home’s purchase price, and you’ll also have to factor for closing costs and other fees. If you put down less than that, you’ll have to pay private mortgage insurance, which will add to your mortgage payment.
While buying a house has its advantages, you don’t want to underestimate the duties of becoming a homeowner.
2. WHAT IS THE DURATION I PLAN TO OWN THE HOUSE?
Typically, renting is cheaper in the short term. That’s because when you rent, you don’t have to pay for things like property taxes, insurance, general maintenance fees, etc. On the flip side, when you buy, you’re building equity as the amount you owe on your mortgage goes down and hopefully the value of your home increases. So over time, the value of that equity could be worth more than the extra cost of buying over renting.
The general rule is that it usually makes sense to buy if you plan to stay in the home for at least five to seven years.
3. AM I READY TO SHOULDER THE RESPONSIBILITY OF HOME OWNERSHIP?
While buying a house has its advantages, you don’t want to underestimate the duties of becoming a homeowner. When you purchase a home, you become responsible for maintaining the property. (Translation: You’ll no longer have a landlord you can call to take care of repairs.) Consequently, buying a home can be a big undertaking. Your nights and weekends may disappear under household tasks like cleaning the gutters, caulking windows and doors, and trimming hedges (if any). Also, depending on the age and condition of the home, you might encounter issues with appliances, plumbing or roofing — which can be costly to fix.
These are just some food for thoughts. Of course, it may depend on the geography of where you’d desire to stay. For some places like Hong Kong where prices of property are sky high; it is nonetheless rare for the average people to be able to own homes without some subsidy from the government. Likewise, this maybe applicable for capitals of many countries. There are many factors that need to be considered in general for home ownership. But where one can afford; the above-mentioned questions will be more relevant to think about not just for the sake of short term satisfaction but also for long term financial growth.
