Things to Consider BEFORE Buying a Home

I was thinking about buying a home earlier in the year. I had started mapping out my finances and how I would afford it.

I had decided that I wanted to save around $100,000 for a deposit and estimated that would take me maybe 2 years.

I was thinking about the areas I wanted to buy in, the size I wanted, and the number of rooms I wanted.

To be honest, I wasn’t really ready to buy a home – I wasn’t done with traveling, but I felt like it was what I should be doing and thinking about because of my age.

26 felt like an appropriate time to start ‘growing up’ and thinking about the future.

But I didn’t and it was the right move for me. However, I know one day I will be a home owner and I look forward to that feeling.

For now I’m going to enjoy travel, focusing on passive income streams and saving so that I can buy a home.

If you’re thinking about buying a home, here are some things you should really consider before buying a home:

1) Can You Afford It?
On paper you might have enough money for the deposit and to make the weekly or monthly repayments, but can you afford it if something goes wrong? What if your home needs some serious repairs? What if you lose your job or are injured and need some time off work? Can you afford that? When I buy a home, I want to have an emergency fund that is quite considerable in size, that I can use if anything comes up and I need to have time off work or repair something in my home. I have seen too many people buy homes that they could afford on paper, but couldn’t really afford when things went wrong. Think worst case scenario.

2) What’s Your Strategy?
I think it’s really important to shop around because if you’re getting the mortgage, the mortgage you choose can be the difference between slogging away at the mortgage for a few extra years. My suggestion is to save as big a deposit as you can afford, find low deposit home loans by Homestart and then pay your loan off as aggressively as you can. There are some loan repayment calculators you can check out online, which I like using to compare the difference paying an extra $50 a week makes on your overall loan balance over the course of the loan. I think it’s important to go in with a plan of minimising the length of your loan and the overall interest paid on your loan, before you start.

3) Is Your Home the Right Size?
I think when I buy a property I’d actually rather go for something smaller – maybe a smallish house on a large piece of land. The bigger your home, the more crap you fill it with (this proves true for anything, a garage, car, handbag… whatever). The more money you spend on filling it with that crap and the more money you spend on heating and maintaining that large home. I would like a house that I could potentially extend if necessary, but I would rather go for something smaller and easier to maintain. You, on the other hand, might be planning to extend your family, in which case you might need to think about the long term goals of your family. It would be frustrating to buy a home, spend a lot of money on renovating it and then find out it was not an appropriate size for you and your family.

A good way to test this out is to rent a home (if appropriate to your situation) that is around the size you think you’ll want. You’ll quickly find out if it’s too small or too big for your family.

4) Do You Want to Travel?
Now, it’s not impossible to travel as a homeowner, but it makes things a little harder especially if you want to go away for a few months or years at a time. Who will look after your home? Will you rent it out? And so on. For me, one of the reasons I chose not to buy a house earlier in the year was because if I bought one I would remain a tax resident of New Zealand. I want to explore lowering my overall tax rate, so this was not appealing to me!

Buying a home is one of the biggest, if not the biggest, investments you’ll ever make so please spend the time to think it through properly.