How Do You Know if You are Ready to Buy a Property? [7 Financial Questions to Ask Yourself Before Buying a House]
Buying a house is every Filipino family’s dream. We feel more settled when we have a home we can proudly call our own. But buying a house is a BIG financial commitment. Many factors should be considered before making this long-term, life-changing decision. If you’re wondering if it’s time for you to dive into home ownership, here are a few questions to think about.
1. How much can you afford?
Money is the most important factor when deciding if you’re ready to buy a house. Take time to sit down and have an honest look at your financial situation. See if it’s realistic for you to buy a house at this time, especially during this time of pandemic.
Think beyond your current financial circumstances and consider your potential situation in the foreseeable future. Look at your job security and possible changes in your priorities.
2. Do you have additional savings for fees, taxes, and maintenance?
In buying a property, never underestimate how much money you will need. Be ready to have cash over and above the down payment amount. You should also be financially prepared to take care of move-in fees, homeowners’ association fees, utility installation fees, and maybe some renovation and furnishing costs. You also have to consider the increased tax burden associated with property ownership.
3. Will you still have a full emergency fund?
After considering all those financial needs, will your emergency fund still be as big as it needs to be? You need to have 3 to 6 months’ worth of living expenses (rent, mortgage, utilities, groceries, etc.) in cash or near-cash assets.
Keep in mind that owning a house increases the importance of an emergency fund. There are a lot more things that could go wrong that you would be responsible for. You would need to ensure that you have enough savings to cover repairs and other unexpected expenses associated with your property.
4. Are your other financial priorities in line?
It’s a good idea to think about property ownership in the context of your overall financial goals and responsibilities.
Do you already have ample insurance coverage for you and your family? Do you have any “ugly” debt that you need to take care of first? What are your other financial goals, and how can a property purchase affect your biggest life goals?
5. Are you ready to settle down in one place?
When buying a property you intend to occupy, you should take into consideration how long you plan to live there. Take a close look at your personal situation. There are circumstances when renting is a better financial decision rather than owning.
As a general rule, if there is a chance that you might move in the next five years, it may be better to rent than buy a property. Can you imagine yourself living in that same house in five years’ time? Do you foresee any significant change that might happen in the next few years — like getting married, or having a kid, or changing careers?
6. Will the location save you money?
“Location, location, location” is a common mantra in the property industry… and for a good reason. A good location can not only make your life more enjoyable and less stressful, it can actually save you money.
If moving can help you reduce your other expenses, like commuting and childcare costs as well as enable you to spend more time on things you actually enjoy and have better work-life balance overall, buying a house can be a sound course of action.
7. What are your financing options?
If after considering all the above questions and home ownership is favorable for you, it’s a good idea to research on your home financing options. Take time to learn the advantages and disadvantages of each and know which one suits you best.
