House ownership is a big step and a huge responsibility, but we all need to provide some place to live for ourselves and those that we care about. So it is hardly surprising that people often ask “should I wait to buy a house?” and then continue to rent or even remain living with parents or other family members.
Making such an important decision as buying a house isn’t something that can be taken lightly and it is prudent to gain as much information as possible before deciding whether house ownership is the most viable option for you. In the following article, we aim to move our readers closer to the point where they can make a well-informed decision regarding whether or not to buy a house.
How expensive of a house should I buy?
So, having have answered the question “why should I buy a house” and decided that it is your most favourable option; further questions are likely to arise. These will include types of property, locations, and predominantly, house prices. When you are making decisions about house prices there are, of course, going to be some other important factors to take into account.
In instances where someone is asking “should I buy a bigger house”? When purchasing a house with a view to making it their home, a different set of factors should, of course, come into play. Type of house, location, facilities, and the available space will all figure in what you need to invest. This also means that there will be some areas where buyers may need to compromise or make a “trade-off” such as looking beyond their chosen ideal location in favour of some of the other items on their new house wish list.
Buying houses in a rising market
One of the benefits of homeownership is that as a “rule of thumb” property prices have always been seen to rise over time. Under certain circumstances in specific areas, this can often happen in “spurts” where prices have been known to rise dramatically over relatively short spaces of time. This is something that real estate speculators and investors call “a rising market” and buyers who are either shrewd or fortunate enough to purchase a property at the start of such phases can make serious financial gains.
Right at the top of your list should be affordability because there is no point in purchasing a house that requires loan or mortgage repayments that surpass your ability to repay them. Having said that, many real estate speculators and investors purchase houses purely to make a profit and as such, they often take some calculated financial risks.
Making a smart buying decision
While this may provide a somewhat obvious answer to those enquiring “is it smart to buy a house”, the reality checks on this phenomenon are pertinent to whether you own a house that is also your primary home. This is because any gains you make from selling will most likely be cancelled out if you purchase again in the same region.
Working with real estate experts
Many prospective real estate buyers still ask themselves “is buying a house worth it” and the real answer to that question must almost always be yes provided that the buyer can afford it. Accurate valuations and professional investment advice are small costs to pay compared with the tragedy of paying too much or even buying the wrong house in a less than ideal location.
Due to the ever-changing financial landscape, banks and other financial institutions are in a constant state of flux when it comes to how much they are willing to forward in terms of home loans and mortgages. The general criteria needed to qualify for such financing will also vary depending on each individual’s creditworthiness and the state of the economy in your area or country.
Many lenders work on a sliding scale that will involve several if not all of the above factors and a fair landmark would be that these institutions are likely to offer loans based on a multiplication of an applicant’s annual take-home earnings. This could be anything from two and a half times upwards depending on how they “stack up” as a credit risk and the perceived resale value of the property they wish to purchase.
Should I buy a house or rent?
When it comes to making the decision whether to buy or rent, it is probably worth taking some time to step back and make your own list of the pros and cons of both options. While there are many advantages associated with homeownership there will also be some circumstances when renting may your best option.
Some key reasons why you might want to rent
It almost goes without mention that the majority of house buyers purchase a property solely as a home for themselves and their family. With this in mind, there are bound to be some occasions where it is more viable to rent than to buy.
Such circumstances may include a temporary job posting away from your hometown or waiting for a new property to be built. These are, however, considerations where renting has already been perceived as only a short-term solution.
Some key reasons why renting may be the only option
There may often be factors outside of a person’s control that make it difficult for them to buy a house such as a lack of deposit or an incomplete credit history. Temporary workers and those on low incomes may also find it very difficult to acquire home loans and mortgages too. That said there are also individuals who actually prefer to rent a property as opposed to making a long-term commitment to purchasing a place of their own.
Rent or buy a home pros and cons
There are several very plausible reasons why renting can be beneficial and they include:
- Maintenance issues are taken care of by the landlord
- Renting provides totally flexibility and mobility as you don’t have to wait to sell
- A wide choice of locations
- Rentals to suit every budget
- A diverse range of property styles and options
- Rental properties are often fully or partially furnished
- No long-term housing loan or mortgage
While renting may seem like an attractive option at first glance, there are also several pitfalls and drawbacks that potential renters may want to consider including:
- The landlord is ultimately in control
- Modifications and alterations are either costly, prohibitive, or pointless as they only benefit you whilst you are renting the property
- Rent is often considered “dead money” because there is no long-term ownership
- There are often restrictions on pets and uses of the property including home offices
- Tenure is not always assured and a landlord could decide to sell at any time
- Unlike a housing loan, rents can be increased at the landlords discretion
- Tenants have very little if any control over the speed and quality of property maintenance and repairs
Despite there being an ever-expanding market for rental properties, more people prefer (given the option) to buy a place of their own even if it means taking on the challenges of meeting the regular loan repayments and here is why:
- Ultimately you or your dependents will own the property
- Rather than filling the landlords pockets your loan repayments will be purchasing something solid for you
- How you use your home and who lives there is entirely up to you
- Decisions about repairs and maintenance are yours to make without having to consider a third party
- Any modifications and alterations can be made totally at your discretion with the right permits and permissions from local authorities
- Pets and people staying over is your business and no one else’s
- You are the one who benefits from any improvement’s and the good upkeep of the house
- You are in control of where you live and when you move, not a landlord
- Owning a house provides you with a solid and tangible asset that also affects your overall creditworthiness
While there are not as many, there are some apparent disadvantages to home ownership and they are:
- You could lose your house if you are unable to meet the loan or mortgage repayments
- You are responsible for all the costs related to repairs and maintenance of your house
- Moving home may not be as simple and swift as when you rent
- Interest rates can fluctuate which means your home loan repayments could increase
Much of the above would tend to suggest that home purchase is a smart move provided a buyer has the means to make the regular repayments, maintain the property, and has the ability to cope with any potential interest rate increases.
When should I buy a house?
If you are wondering “when should I start looking for a house to buy”? There really is no one size fits all answer. Bearing in mind some of the above, there are many important factors that are likely to influence not just buying a house in general but what type of house you may be able to afford. From savings at the bank and your current income to your personal circumstances and the needs of your family, all of these things will have a bearing on the right time to buy.
Buying a house as soon as possible
The key phrase here is “possible” because that is likely to be not only a buyer’s most limiting factor, it is also something that may need a long hard look at before you make a buying decision. The experts say that “where there is a will there is always a way” and this is also true of home ownership. In real terms, if you can afford to pay rent there is no logical reason why you shouldn’t be capable of paying the same amount in home loan repayments.
Doing the math
As often as not, buyers are willing to make some financial sacrifices to set off on the road of home ownership. This could mean anything from taking on an extra job to holding back on some of life’s luxuries for a short period of time. This is because they have weighed up and been convinced of the benefits of buying instead of renting a home. Once that hurdle has been crossed, the biggest challenges for many first-timers are that of raising a deposit and convincing a lender that they are capable of meeting the repayments.
Buying it now
Under such circumstances, “right now really” could be the answer to the question “should I buy a house now?” Historically prices have continued to rise so waiting for a slump in the market may not be the smartest move. Waiting for wages to rise may only be relevant for younger buyers or those who have only just taken their first steps onto their chosen career ladder. Furthermore, house prices have a nasty habit of rising much faster than wages do and, as of yet, that situation has never been resolved.
Making a house buying decision
As the song says “only fools rush in” but those who dither around waiting for the market to change or wages to somehow miraculously increase won’t be getting their shaky feet onto the property ladder any time soon. As with many things in this life, there is some credence to the idea that if we wait until we can afford certain things we may, in fact, end up waiting forever. Very few individuals are ever likely to find themselves in the fortunate position of being able to buy a house for cash so that too is probably well down our list of reasons why you should delay.
Making an early start
We often hear people asking whether they should wait until next year, asking questions such as “should I buy a house now or wait until 2018” or whichever year it was at the time. The sooner an individual begins the buying process and starts to make loan repayments, the quicker the property will be paid for. Many entrepreneurs and business people have used the property that they own to leverage finance for business and this also becomes an option much sooner once that all-important buying decision is made.
Even the most skilled experts are unable to predict how the housing market and economy are likely to perform in the future. One thing is certain however and that is that those who answer the question “should I buy a house in 2018” in the affirmative stand a much greater chance of owning their own homes. With every payment made, moving home buyers closer to their ultimate goal of ownership, there are no strong arguments to support waiting around until things change.
Buying property sooner rather than later
It is, therefore, sensible to suggest that buying sooner rather than later may always be the most prudent option unless buyers are waiting for some kind of lump sums such as an inheritance or savings plan. Of course, there will always be market fluctuations and unforeseen economic circumstances that no one is able to predict. In the medium to long-term, however, those who choose to buy houses for their prime residence continue to benefit over those who are renting. So, when asked “should I buy a house right now”, the answer is most likely to be in the affirmative.
So is it time for you to buy a house?
We trust that having read the above, our readers will now be better equipped to make an informed decision about whether they should opt to buy a house rather than continue to pay rent. Having answered some of the common questions that potential buyers may ask themselves, we thought readers might further benefit from answering a couple of our own.
Can you afford to buy a house?
If you have been paying rent for any period of time, then logically there is nothing preventing you from paying at least the same amount of home loan or mortgage repayments on your own property.
Many potential buyers worry about the cost of maintenance and repairs but provided you buy wisely and invest in a good survey before committing you are not likely to get any unpleasant or expensive surprises.
Furthermore, homeowners tend to take far more of an interest in looking after their homes because after all, it represents what is probably the biggest financial investment most of them are likely to make in their lifetime.
Do you want to keep in paying someone else’s mortgage?
The harsh truth is that if you are paying rent there is a better than average chance that your hard earned cash is being used to pay the owners home loan or mortgage. This means whilst your financial situation remains stationary, the landlord is moving closer to owning the house you are living in.
One of the biggest advantages that house buyers enjoy over renters is that at some point (no matter how far in future) they will own the house they live in outright. While this may not seem important right now, it will make a huge difference in old age when many of us will be living on a limited income. Whilst homeowners will have nothing to pay, the rent will still be flying out of the bank every single month of the year.