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NOW Is The Time To Buy Your First House

first home buyersOver the years I have advised many first home buyers as to the right time for purchasing a home. In many cases I have found them really apprehensive and overcautious. This stratum of buyers does not trust itself too much. First home buyers readily assume that they should take the property plunge only when they have enough in their kitty. Nothing could be farther from truth.

Buy your first home as soon as  you get a chance

Don’t get me wrong. I also believe that your first home should come only when you have enough resources to tackle your mortgage commitments but this is about it- do not delay any more than this. In clear and concise words, the best time to buy a home is NOW.

Mortgage is a better proposition than savings

Let me validate my point here. When you look to buy your first house, you are presented with two choices. First, you save money and buy later and second, you buy a home and pay mortgage on it. Now, when you have money in your savings account, there is a great chance you will blow it away.

On the other hand, mortgage liabilities present a case of forced savings. You know it is an obligation, not meeting which can have legal consequences. I am sure you know this. So, look at it this way: When you pay your mortgage, you make savings because you create home equity.

Do you think that earning interest on your savings account is a better option than making capital gains on your property?

Buying a property is better than living on rent

The same logic follows for the “Buy versus Rent” debate. You would have heard the phrase “dead money” being used for rental payments. This phrase, in my opinion, nails the issue. When you pay rent, you only help others pay their mortgage but when you pay monthly mortgage, you build your own asset base. Simple but undeniable logic, isn’t it?

Due diligence is a prerequisite

Conduct your Due Diligence and learn about:

  • Possibility of capital growth
  • Where the property lies on the growth curve
  • Whether the purchase is in historically successful areas or counter-cyclical in nature
  • Rental yield (though it is not for first home buyers, the person you sell it to tomorrow might be an investor whose priority is high rental yield)

You can seek the services of a seasoned buyer’s agent for the purpose. I will be glad to receive a call from you.

Mortgage Offset Account is a smart idea

If you still think saving will hold you in good stead, save in a Mortgage Offset Account. It will help you pay less in your mortgage interest each month. Let me explain this: let us say you have borrowed $200,000 for your home and your Mortgage Offset Account has a balance of $30,000.

Now, via the mortgage offset plan, you will not receive any interest on your $30,000 (which would have been minimal anyways). However, you will only have to pay interest on $170,000 ($200,000-$30,000) and not $200,000. There you go; savings aplenty if calculated over a period of 25 or 30 years (loan duration).

Hopefully, you get the long and short of my recommendation- the reason why I say that the best time for a first home buyer to buy a property is NOW.

What percentage of upfront cost are you willing to save before entering the market? I invite your opinions.