Deciding to buy a home can be daunting. Consider market unpredictability, your financial stability, and responsibilities like maintenance and insurance. Avoid rushed decisions, explore alternative investments, compare renting costs, and decide if the home is an investment or residence. Seek professional advice to align your choice with your goals for a secure financial future.
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“I (30M) saved 180k deposit over the past 10 years and I’ve watched my deposit go from being able to almost buy a whole home to being worth 1/3 of a home – its really gotten me down. I decided now to buy a house or I never will due to the fear of being locked out of the market for good. In 5 years my deposit might not even be 1/5 of a home. However, is this a good enough reason to purchase a house? I’m not keen on the added stress oh home ownership and flatmates/tenants but it would be nice to have somewhere to call home for my (I live with my parents rent free). It will also be hard for me to see my savings depleted back to $0. Would like any thoughts or ideas or if anyone has been through this before also?”
(Original question on Reddit)
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It’s understandable that you’re feeling stressed about this decision. Buying a home is a significant financial commitment. For most of us, a house is the most expensive purchase in our lives, so it’s completely normal to have concerns. Here are a few things to consider:
Market Unpredictability
Real estate markets can be unpredictable. While it’s true that home prices have been rising in many areas, no one can say for sure what will happen in the future. So, timing the market can be extremely difficult, and while no one can say for sure where it is headed, there are general trends and advice we can consider from experts.
Financial Stability
It’s important to buy a home for the right reasons. If you’re financially stable, have a steady income, and are ready for the responsibilities of homeownership, it could be a good time to buy. So evaluate your overall financial stability and goals and make sure you have the ability to manage mortgage payments comfortably.
Homeownership Responsibilities
Owning a home comes with responsibilities beyond the mortgage payment, like maintenance, repairs, insurance, and council rates. Make sure you’re ready for these extra payments and take them into account so you are not surprised when the bills come home.
Emotional Factors
Don’t underestimate the emotional factors associated with buying a home. It’s important not to rush into buying out of fear. Make sure it’s something you really want and not just a reaction to market conditions. So take your time to sit down and decide your financial goals, current situation and then make an informed decision.
Investment Alternatives
If homeownership seems too stressful or unaffordable right now, there are other ways to invest your money. For example, you could consider managed funds, stocks, or retirement accounts. Other alternative investments are Term Deposits. However, they will offer much lower returns but are still better than not putting that money anywhere.
Consider Renting for the Time Being
Compare the costs of renting versus buying in your area. Sometimes, renting can be a more financially flexible option, especially if home prices are significantly inflated. It allows you to invest your savings elsewhere and potentially save more money until you are ready to commit to buying a home. If you decide to continue renting, have a financial plan in place to make the most of your savings. You can invest in assets that offer the potential for growth while keeping your options open for future home purchases.
Investment vs. Lifestyle
Determine whether you view the home primarily as an investment or a place to live. If it’s primarily an investment, you may need to accept the possibility of your savings being tied up in the property.
Professional Advice
Consider speaking with a financial advisor, Mortgage advisor or real estate professional. They can provide personalised advice based on your specific circumstances and help guide you through the process so you can comfortably make the best decision.
Remember, it’s okay to take your time making this decision. It’s a big step, and it’s important to make sure you’re making the best choice for your personal and financial goals. There’s no one-size-fits-all answer, and your decision should align with your financial goals and lifestyle preferences. It’s essential to weigh the pros and cons carefully and seek advice from professionals who can help you make an informed choice. Don’t rush into a decision out of fear; instead, make a decision that suits your long-term financial well-being.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The information in this post is only general in nature and is not personalised financial advice. Please contact us if you want financial advice.
