Making the decision to buy your own home is very often the single biggest financial decision you will ever make. When you buy a home, you can expect many new responsibilities, both financial and emotional. Emotionally, this may be a signal into real adulthood where you decide to start a new family. Financially, you have to be disciplined enough to make sure your can not only make ends meets, but also start to build long term wealth.
We’ve compile a simple list here to evaluate whether or not you’re ready to buy your first home and embark on your journey to financial security.
You Don’t Have a Plan for Your Financial Future
This one may sound obvious, but it is not! Having a financial plan meanings organising your finances so you can effectively save for a deposit, afford the deposit and the mortgage payments and other costs related to your property.
When saving for a deposit, make sure your have money for the deposit and all the hidden costs of buying a property, such as legal costs, insurance payments, stamp duty etc. Once you purchase a home, can you afford the mortgage payments? Remember, if you’re getting a variable interest rate mortgage, you need to be prepared for a rise in interest rates. On top of your mortgage, you will need to pay for your quarterly utility bills, strata fees, council rates and potentially other taxes. You should have a solid financial plan so stay on top of all of these expenses while still being able to accumulate your emergency fund.
If you have credit card debts, personal loans, car loans etc, it is wise to get all your debts (especially bad debts) sorted first before you think about buying your first home. Make sure you clean up your act and attain a high credit score before thinking about getting a 30 year mortgage.
You Haven’t Found a Solid Career Path
How many job changes have you had in the past 2 years? If you are constantly switching jobs and constantly thinking about finding your ‘purpose’ or ‘passion’, then you may not be ready to purchase a your first home. Like it or not, you need a bit of stability in order to step on the property ladder. So until you find a solid career plan that you can stick to for a while, you may not be able to afford a long term investment.
Finding a solid career to pursue doesn’t just mean a stability in income, it also means that you have personal stability to stay in one location. To really build up significant equity, you need to be able to stay in your new home for up to 5 years to make the investment worthwhile. So ask yourself, are you ready to commit?
You Can’t Effectively Manage and Fix Problems
You might be thinking – what’s the difference between owning a home and renting a home? Well, if you’re renting and the tap breaks or leaks, you can simply offload the problem to your landlord. But when you’re the owner, you need to take the extra responsibility. You need to either learn to fix up the problems yourself or have the resources and time to pay others to fix the problems. Fixing problems will not an one-off event, you need to also maintain the property in top condition, that means you’ll need to spend time educating yourself about managing your own property.
If the aforementioned three things don’t deter you, then you are definitely ready to step onto the property ladder. Get your finances sorted and do your research thoroughly, you are ready for one of the most important and biggest investment decisions of your life.