Owning your own home represents security and financial stability, and the simple fact of the matter is the sooner you get started the better off you’ll be by retirement. Troubling statistics reveal that about 10% of retirees reach the end of their working life with a mortgage still to pay off.
A combination of factors has played a part in this, including the fact that house prices have risen over a generation to now account for seven times the annual average salary. Thirty years ago it was closer to two or three times the annual average wage.
Comparatively speaking, houses are more expensive, which means they will take longer to pay off. That makes the case even more compelling for you to get started sooner on the road to home ownership.
Why should I invest now?
Now is a great time to get into the home ownership market, with low interest rates and well-priced homes available. Broadly speaking, it’s an opportunity to get in before things heat up. Interest rates are at an all-time low but as sure as the sun rises in the east, rates will rise again. It’s expected that by 2018, rates once again will be heading north.
Owning your own home sooner is also an opportunity to start adding value to that investment. You’re more likely to renovate and make those improvements when you’re younger. Renovations to your home are likely to increase its value, unlike any improvements you make to a rental home, which benefit someone else’s investment.
Also, buying when you’re young means that investment is more likely to be your principal place of residence, and that means it is capital gains tax-free. This is an advantage compared with other types of investment. Home ownership is also an opportunity to build up equity and the sooner you start doing that, the better for your long-term future.
The process of buying a home teaches you a lot about budgeting and saving. The sooner you learn those lessons and master the skill of being fiscally disciplined, the better your financial future will be. When you buy your own home, those regular weekly payments are paying off your mortgage, not someone else’s. It’s like a compulsory savings plan. So why put off growing your own wealth and future security?
Top tips to buy your own home sooner
1. Don’t procrastinate – start today. If you’ve been putting off getting that deposit account started, dally no longer. Get started immediately. Create an online savings account and set up a regular direct debit every pay day that whisks 10% of your salary into this account before you have a chance to spend it.
2. Scale down your expectations so you can scale up your assets. Instead of saving 40% deposit for a huge four-bedroom home, start smaller. Saving 15% for a deposit on a small townhouse or apartment a bit further out of town will get you out of the rental rut sooner. Your first home is unlikely to be the only home you own. Start small and work your way up to your dream home.
3. Budget wisely. Make a savings plan so you know how long it will take to save your deposit. If you need it, ask a financial planner for help. Taking austerity measures, such as eating baked beans on toast for a year, is not likely to be a plan you can stick to. A financial planner can help take an objective view and come up with a budget that’s realistic. After all, realistic goals are achievable goals.