Purchasing a home with the intention to move in and keeping away from credit card debts are two of the best decisions you can make financially. This isn’t because the prices of houses always increase, because they definitely don’t – this is because majority of people aren’t the best at saving.
Renting a home will generally put you in a position where you are far more likely to feel the rising and falling affects of the market, as well as placing you in an extremely different circumstance to someone that owns their home come retirement.
Purchasing a house is a fantastic decision financially, for most people. In the current housing market, a troubled question that most people are faced with is how much should they spend, or more deeply put, should they spend more than they want for a home? Or pay more for a home than what it’s worth?
Should someone pay more for a home than they can afford to?
In majority of circumstances, spending more than you can actually afford isn’t the best idea. Although a person’s financial situation usually improves as they age, life is unpredictable, and people don’t seem to compensate for the things that could affect their incomes, such as divorce, illness, starting a family and/or job loss.
Likewise, interest rates, taxes and economic conditions are the other types of unforeseen factors that have the potential to influence a person’s financial situation.
What about paying more for a home than it’s worth?
Knowing as much as you possibly can about a property, such as the area in which it’s located, current market conditions, our economy and where you sit financially will help you answer this question accurately.
In order to understand just how much a property might be worth, previously buyers have needed to pay for a valuation or engage a real estate agent. Although both of these options definitely prove worthwhile, there are some other tools potential buyers can use in order to assist with making a responsible decision. For example, it can be as easy as visiting the ‘Sold’ section of Realestate.com.au and having a look at what other homes in the area have sold for.
Once you are equipped with the knowledge and you have a clear understanding of how much you can afford, you will be able to assess what the property is worth to you. If you’ve fallen in love with a property, offering a little bit extra is likely to work in your favour, especially in an area where buyer demand is high.
If you plan to do some serious renovations and improvements to the property, paying a little above market can’t hurt either.
Buying the worst house in the best street is common advice that is handed out by real estate agents, but this advice actually does hold value when referring to good areas, and it’s very possible to do well if you plan to demolish and re-build or renovate.
If you do want to pay slightly over market value in an attempt to secure your dream home, it’s still important to keep within your allocated budget.
You will need to keep in mind that it may take a number of years for the property you’ve purchased to actually be worth what you have paid or are willing to pay, so the longer you keep the property, the less likely you are to make a loss.
ENTIRETY OF ARTICLE: Realestate.com.au