For many people, buying a home is a major milestone in life. Talking of home ownership, aren’t you tired of dealing with landlords? The thing about paying rent is that you will never see that money again. What you really want is a place to call your own, to build towards your future instead of working hard to enrich your landlord. You want freedom.
Of course, there are various considerations you have to keep in mind before deciding to buy a home. Owning a home comes with various cons and responsibilities that require deeper thoughts. For instance, you will have to pay for all the home maintenance, property insurance, and the new cost of taxes. Chances are your mortgage payment will be higher than your current rent, which may mean fewer night outs and less travel.
So, how and when do you decide whether to buy or rent a home? Honestly speaking, it’s not about “when” but “who.” In other words, who are you and what is your position in life? It’s not about the age you need to attain, but the milestones you need to attain and the person you need to become. Some people buy their home at the age of 21, others 40, while others rent for life, which is fine.
On the brighter side, owning a home has its own advantages. But before you commit to buying the Cyberjaya property that you have been eyeing on for some time, here a few things that should serve as a road map when making your decision.
- Are your finances in order?
Do you have a stable income? Are you currently servicing any loans? Could be personal loans, students’ loans, or auto loans? Ok, I am not saying you need to be completely debt free to start thinking of owning a home. But having a debt is one of the symptoms of financial instability, or at least not having enough money. If you are always forced to use a credit card each month to bridge the gap between paydays, consider renting a little while longer.
How about your credit score? This is basically the number of bank uses that determine how good you are at handling credit. If your score is terrible, it means you are that poor at handling credit. I understand that some factors that affect your credit score may be beyond your control, but even so, you need to clean up these issues before you consider buying a home.
- What is your plan in five years?
While no one is absolutely certain about what will happen over time, you should take another look at your five-year plan before deciding whether to buy or rent. For instance, if you are planning to move out of state or switch careers in three years, you should probably consider renting.
If you have plans for a long-term stay, you are better off buying a home as soon as possible before prices sky rocket. By buying a property sooner; you can start accumulating equity much earlier with the trend of rising home prices.
The bottom line is, only buy a home if you have a long-term career or business engagement in that particular area. Plan to stay in that house for at least five years, and if you are not ready to settle down in one place for that long, keep renting until you are ready for this commitment. Yes, it’s a good idea to rent your home if you are going to be switching jobs and careers. However, being a landlord is quite some work, and you need to understand what you are getting into before you take this route.
- Have You Saved Enough For A Down Payment?
Chances are your down payment on your home will be the single largest payment you are ever going to make. It’s not just the down payment, but all the hidden costs associated with acquiring a home. Most homes today require a down payment of 10 percent. So if you are buying a RM 600,000 home, it will go up to RM 60,000 for your down payment. It doesn’t stop there as buying and financing a home takes more than just the deposit and the loan, it also involves miscellaneous fees and charges such as stamp duties, stamping fees, SPA legal fees and so on.
There is nothing as bad as buying a dream home and not leaving in it right away for lack of repair and maintenance funds. You may end up stuck with plain cabinets or plain white walls for longer than you had wished. If you can afford a home down payment and all the miscellaneous fees and still left with a little extra for repair and upgrades, then you are the right candidate for home ownership.
- How about the monthly payments?
Besides the down payment, you should analyze your sources of income and expenses to see that you can actually keep up with the monthly mortgage payments and all expenses associated with owning a home. Are the monthly costs higher than the cost of renting? And can you keep up with this adjustment?
The truth is the amount of money you pay your rent may be similar to the interest and principle you would pay on your mortgage loan. However, as earlier mentioned, the interest and principle are not the only costs you will have to incur. Other costs include the property costs, insurance, property taxes, homeowner’s association fee, water, garbage and sever, and other utilities. These charges add up hundreds to your overall monthly payment.
Be careful about using online mortgage calculators to find out how much it will cost you to own a home. As you can see, the mortgage payment is just part of what you need to maintain your new home.
You are the only person who understands that status of your personal budget, but the general recommendation is that you should not take a monthly payment that is more than 30 percent of your monthly income. Some lenders will allow you to squeeze yourself a little further than that, but in most cases, this is a trap in waiting.
As you can see, buying a home is just like buying a property of any kind, you need some deeper thought before you kick off your shopping. There might be other personal factors to consider such as personal health, prevailing economy, job stability, and so on, but the above four are the primary considerations. Don’t be afraid to postpone owning a home until you are certain that you can keep up with the commitment and associated costs.