There are many rumours and untruths floating around about things concerning buying a house. This article sets out to see what they are, and why they are simply not true.
1.Now is not a good time to buy
The value of property has increased a lot in recent years. Many people believe they should wait until prices come down to buy homes because they will be more affordable.
Don’t do this! You cannot predict the real estate market. Data can show us peaks and valleys in the market all the time. If you wait, the market may have gone up 2% before a 1% correction. You’ll still pay 1% percent more for your new home than if you had purchased it when you first thought about it, and until you buy it you are still paying rent for months or years when you could have started paying off your new mortgage.
The time to buy is when you are ready — both financially and emotionally. Life events such as getting married, having children or getting your first stable job usually drive this. When you’re ready, it’s time to buy.
2. It’s cheaper to rent than to own a home
I think this is a common misconception because if you live in rented accommodation and something goes wrong it is the landlord’s responsibility to fix it. For a replacement boiler, for example, these costs are thousands of pounds. However, this is just a short term financial gain. Over the years rents rise. Regularly assessing your mortgage repayments allows you to pay fixed sums and over time you build more equity in your home. On top of this, inflation in prices will also bring you more equity. After a certain time, you will own your home outright and can look to enjoy a retirement without paying rent or mortgage, saving you a lot of money.
3. Buying, renovating and selling will make you a fortune
While it is true that money can be made in ‘flipping’ properties, house prices these days coupled with decreasing prices for buying materials means that the value added by renovating is quite low. Very few people buy a home and make a huge profit in a year or two unless they are very savvy and know what they are doing. Owning your own home is great investment, but you must plan on being there for a number of years. Value can also be gained by living in it and enjoying the improvements you have made.
4. You can get everything you want in your first home
It is human nature to want everything. When we build our wish list we don’t tend to hold back. Our wish list almost always outgrows our budget. Figure out the top few things that are most important to you and be firm on those. Be ready to compromise the rest to get what you want most. A great idea is to sit down and work out your ‘mandatory’ requirements and those you would be willing to compromise on, because unless you build your own house it is very rare that your ideal home either exists or is within your budget.
5. You should buy as much house as you can qualify for
Because we want to get as much as we can, we tend to think of our lender’s limit as our personal budget. But a lender will allow you to commit up to 50 percent of your gross income to your monthly debts. Is that wise? What happens if you are on a variable rate mortgage and the base rate increases? Where will you find the extra money? Only you can decide. Don’t let your lender determine your budget. Sit down with your spouse, family or trusted advisors and determine an amount that makes you truly comfortable. Remember, if you spend less then you will have more income to allow you to make changes to your home that will personalise it more for you and your requirements.
6. You need to have 20% deposit to buy a home
There are thousands of different mortgage options out there, will lots of different options. There is also the Help to Buy Scheme. Speak to an independent mortgage advisor and get some real advice on what you truly need in order get the right deposit for you.
7. Don’t Allow Too Many Lenders to Check Your Credit Score
“Hard” credit pulls (when you apply for a loan) do lower your score, but if you have multiple pulls for the same type of application, the hit to your score only happens once. Shopping for a loan makes you a smart consumer, not a higher credit risk. So, shop aggressively. Remember, going to a bank will limit your options to the products they sell, and with thousands of options out there you want to check them all. Before you commit to a mortgage advisor do your research. Some only have access to a limited number of lenders and offers while some have access to almost everything.
8. You should pay off all your debt before buying a home
It might be a good idea to pay off all your debt, but it might not be, depending on your circumstances. If your credit scores are good and you have plenty of income for the loan you need, it might be better to conserve cash and use it towards your deposit. Your mortgage advisor should be able to guide you on this.
9. You must be in your job for two years
This is simply not true. You must demonstrate to a lender that you can consistently earn the income you need to qualify. They will assess your spending patterns and calculate your commitment and ability to repay the loan. You also need to prove that you have a full time and permanent income. Speak to a mortgage advisor if you are self-employed as the requirements are slightly different.
Don’t let home buying myths stop you! When it is the right time in your life to buy, it’s time to buy. Do your homework, consult with experts and go shopping!