So let’s say you’re looking to buy yourself a new house, but you can’t decide how much to spend. This is a common problem as it’s hard to decide whether you should invest more or less.
This has become even more complicated with a tumultuous property market. It is also a tricky problem as buying a bigger, more expensive home will change the size of your mortgage loan.
Table of Contents
What’s the Point in Spending More?
Lots of potential homeowners want to get a home with little fuss and a minimum of expense. This is not necessarily the right idea as buying your next house isn’t like picking up a cheap bargain on airfare.
You will be stuck with this property for a long time and if you cut corners you will end up paying for it in the end. Spend a little more (and take your time) to make sure you make the perfect buy – this will pay dividends for decades to come.
Is a House a Good Investment in this Economic Climate?
The argument above relies on the theory that property is a good investment. Yet this is an area that has seen a huge amount of turmoil in recent years and homeowners have routinely lost out on their initial purchases. In the short term this is certainly a bad market to be in, but buying a house is not a short term proposition.
Your investment horizon should be at least 5 or 10 years by which point prices are very likely to have recovered significantly. Property has always been a solid investment, and the recession is not going to change this.
Can I Afford a Home Loan?
You obviously need to be careful when considering a loan, yet with interest rates where they are you can probably afford to get one. The government has brought these down to stimulate growth and you can hopefully get set at a very reasonable rate.
This means you will be able to pay off your house slowly. If you pick your property right you should be able to find something that appreciates at a rate which makes any interest you pay well worth it.
What if I Intend on Moving in a Few Years?
If you don’t plan to be in this house for a long period of time you need to consider a lot of different variables. Indeed, this shortens your horizon for investing and also gives you less time to pay off your debt.
It also raises the question of whether you should be buying at all; indeed, you should probably only buy if you intend to be in the same place for at least five years, otherwise stick to renting your apartment.
Essentially, the moral of the story is that if you’re going to buy a home, do it right. Don’t cut corners and get something cheap. Instead pick something that’s a good investment and somewhere that you want to live in for a long period of time. It’s really as simple as that.