First-time home buyer tips March 30, 2022 – Posted in: Investments – Tags: real estate
In this post we’re going to consider the best first-time home buyer tips for people looking to make the most of their investment. Buying a house or apartment is often the first big investment people make and can also be the topic of great joy or great regret depending on the quality of decision made.
It’s not always easy to know when individuals should buy their first home or apartment. After all, investing in property comes with a heavy dose of commitment and also a certain level of risk.
The commitment we make when we invest our hard earned savings and lock it into buying property, is that we won’t be able to access the money allocated to buying the property until many years into the future. When buying property, we’re also commiting to paying back a certain amount of mortgage every month for years to come.
The good news is that paying back a mortgage is much like paying rent except that after your mortgage is finally paid back, you’ll own the property in the future.
The advantage of paying rent is that you aren’t locked in a 10-20 year loan like you are with paying mortgage for a house. There is some value to this if you aren’t yet at the required stage in your life.
Other commitments involved with buying a property include upkeeping the property and maintaining or improving the building, yard, garage, roof, and other such things that can become expenses in the future.
Buying a house also involves paying property insurance each month like you do with your car and other expenses like the possibility that unforseen work will need to be done on the building.
There are variables that could change as time goes by and it’s for this reason that it’s always better to be prepared for the worst and set aside enough money if it becomes neccessary.
So all of these issues begthe question that many of us face before buying a home. When do we make the decision to stop renting and buy our first property?
Decisions to make: First-time home buyer tips
Buying a home shouldn’t be done hastily and all of our first-time home buyer tips should be considered before making a decision. As an investment, buying a home is better than paying rent for ten or twenty years which gets us nothing in the end. Investing in a home actually pays big in the future when the mortgage is paid and the house becomes yours at 100 percent.
Although buying a house is preferable to renting, finances need to be aligned before this can happen in real time. For starters, you’ll need to have enough reliable income to make your long term mortgage payemnts. You’ll need to have a steady job or a business that looks reliable long forseeable future.
You’ll also need enough to be able pay the monthly mortgage payments, food, electricity, water, gas, car insurance, health insurance, homeowners insurance, phone bills, travel, vacations, and everything else involved in daily life.
It’s for this reason that many experts advise that only about 28% or roughly a third of your income should be devoted to your monthly mortgage payments. So if you pay say 700 a month in mortgage on a small apartment let’s say, you should be making at least 2100-2500 per month of income.
By calculating your numbers like this, you can have a better idea if you should the lengthen your mortgage term. If you take a longer term, you spread your payments over a larger number of months and years reducing the amount you’ll owe each month so you can easily manage your other expenses.
Calculating mortgage loan payments and budget
There are many tools available online which offer first-time home buyer tips. Tools and websites allow you to calculate your budget, mortgage amount, and monthly payments. These calculators give an idea of your monthly payments, your down payment, how long your mortgage term should be, and how many years you’ll make payments until your home is payed off.
Handy online calculators like www.mortgagecalculator allow you to graph out all your monthly periodic loan payments and are extremely useful to show the amount of interest that comprise each payment until the loan is paid off at the end of its term so you can find the best plan for your budget.
Another great tool for figuring out your downpayment towards your home can be found on sites like nerdwallet.com
Sites like these can be very useful so that you know what your down payment will be, what your monthly payments might look like over the years, and what your total interest rate amount will be for the mortgage loan.
Homes are more than just simple investments
A home is more than a simple financial investment. Buying your first home is also an investment in your lifestyle, your future success, and potentially your career as well.
As the world recovers from COVID 19, businesses and business owners are realising the importance of being able to work from home. Today more than ever before, your dwelling place should be a place you feel comfortable working in if you want to be effective and productive in life.
This is why even if you work in an industry that is traditionally done remotely, you should still feel comfortable doing office work, taxes, bill paying, and studying at home.
In the post COVID world we should all plan for extra space to accommodate a desk, a computer, and a printer so that we can continue to be productive. When buying your first place, you should consider buying slightly bigger than you had initially planned so you can have your much needed office space.
Another reason to consider buying slightly bigger than you might have initially planned is to allocate for storage and the accumulation of items over the years. Sure, a midsized place might be big enough for you now, but will it be big enough for you ten years from now when you still have ten years of mortgage to pay back? These are very real question to ask before buying.
Maintenance Charges associated with buying an apartment
I’ve personally talked to many first time home buyers and most of them are unaware of the often hefty charges associated with buying an apartment. We can divide these costs into a few categories of costs:
- Services related to the use of the building and associated taxes
- Routine maintenance and repairs in the building’s common areas
Common maintenance charges must be factored into a buyer’s budget in addition to the mortgage payment when considering an apartment. These charges can easily amount to thousands per year and can even make or break you if you haven’t planned for them. Knowing these charges is essential, not only for establishing what a buyer can afford, but also for estimating resale value. No one wants to pay through the nose to for added on charges and the next buyer won’t either.
It’s also important to understand before buying that these charges are not static and can be adjusted by the board of owners of the building. Charges may be adjusted for a specific period to cover large expenses like painting the exterior of the building, or they may be adjusted permanently for consistent expenses such as a cost of living.
The most common charges cover maintenance of all the facilities and may include any of the following: Elevator costs, parking, garden and landscaping, plumbing, trash, gym, electric bills for common areas, gas and water rates, etc.
Buying a house as opposed to an apartment has a number of advantages and all these factors should be calculated over the years of the mortgage to make the best decision possible. Paying two thousand in charges per year may not sound like much to you now but try multiplying that amount over a twenty year mortgage. This equals 40 000 extra expenses just to pay for property charges which have no real return on your individual apartment investment. Imagine what you could have done with this money if you had used it instead to buy a bigger house.
Buying an apartment may be a good decision despite its negative aspects. If you plan on renting your apartment to someone within a few years of buying it than it might be a good decision as apartments are often more desirable to renters.
Buying your first property can be exciting and may even seem intimidating. You should talk with friends, family to get first-time home buyer tips to gain as much insight on the subjecr before moving forward as you plan a strategy of action. Talk to someone who has done what you are looking to do and somone who is in a similar financial situation who has bought similar property. Doing this simple step could help point you in the right direction for this first investment on your future and save years of regret and savings.