You might think yourself ready to buy and own property, but you won’t know for sure until you have asked yourself these questions.
Have you saved up enough?
While you might be able to qualify for a home loan without having savings for a sizable deposit, but that does not mean that it is the right thing to do. The bigger a down payment you can afford, the better mortgage rates you will qualify for, and the less you end up paying in the long run.
A 5% deposit is too low. The ideal scenario is having saved enough to be able to put down at least a 25% deposit. However, deposit on a new house isn’t all you should be saving for. The responsible thing to do is to have an emergency fund of at least three months of your income. If you don’t have enough saved for both a down payment and still have an emergency reserve, maybe you should wait and save more first.
Are you financial stable?
Owning your own property isn’t worth it if the monthly bond payments make such a strain on your finances that you will struggle in other areas for years to come. Or worse, defaulting on your payments later down the line and losing your house completely.
Too many people make the mistake of simply assuming that their paycheck will increase in a constant rate throughout the years. They therefore think they can afford something a little out of their price range now, because later on it will become easier and easier to pay.
That’s the wrong way to look at it. Unfortunately, salaries don’t always increase at the rate we expect them too. Ask yourself what you are able to afford right now, and whether you would still be able to afford it for 15 to 20 years even if you don’t make much more money. Use a bond repayment calculator to get a realistic idea of what you can afford to pay.
Are you ready to settle down?
It’s not all about finances. One of the most important questions to ask yourself is if you are ready to settle down. Owning property generally takes away some of your mobility and flexibility. What if you one day realise you would have liked to have lived overseas for a couple years or followed your love to another city. Once you own a home, you’re going to be rooted for quite some time.
These things are not impossible if you own property, but it does make it more difficult. So if you are young and still have some wanderlust in you, ask yourself if you are really ready to commit to owning property.
If you have saved up enough money for a sizable deposit while still retaining an emergency fund, you are confident of your financial stability, and ready to settle down and grow roots, then you can go ahead and start looking at property. If you have answered yes to all the above questions, you could be on your way to calling yourself a homeowner.