At some point in your life, you will most likely buy a property. And when you do, you’ll suddenly expose yourself to a world of complicated rules and procedures designed to ensure that the transaction goes smoothly.
From the outside looking in, it can all seem incredibly complicated. Not only do you have to work out which house you want to buy, but you also have to work with multiple professionals to make it happen. It can all get very complicated, very quickly.
You shouldn’t go into buying a property naive. Here are some of the things that you should know before you sign any contract.
You’ll Have To Pay For The Upkeep On Your Property
Renting a property is generally much more straightforward than owning one yourself. While it might seem like money “down the drain,” at least the landlord takes care of all the maintenance for you. They own the asset, so it is their responsibility.
When you buy your property, however, you have to pay for all the upkeep. Nobody is going to finance it for you. And the costs can be relatively high. The average homeowner typically spends around one percent of the value of their property on maintenance every year. And that is usually a substantial chunk of the average person’s budget.
You’ll Need To Choose The Right Mortgage Option
The type of mortgage option you choose depends very much on your financial circumstances and long-term plans. But figuring out which product you need can be more challenging than you think. For this reason, working with a mortgage broker can help tremendously. You get the advice you need, helping you avoid something that could potentially be a bad financial decision.
You’ll Need A Downpayment
Banks don’t provide mortgages unless you provide a downpayment – a sum of money covering part of the home’s cost.
Before the financial crisis, many financial institutions offered “zero money down” options. These allowed people to take out a mortgage without any money up front at all. Policies like that led to the financial crisis, which almost destroyed the banking sector. Today, the banks take a different approach. They’re not so willing to hand out money for nothing. They want proof that you’re invested in your property.
Downpayments now average around 20 percent of the value of the property. So you need a good chunk of money in the bank to get on the property ladder. Please note that when you use this money to buy a house, you’re not spending it; you’re transferring it. Even so, for most people, the final figure is more than 150 percent of their annual income. And that’s a lot of money.
You’ll Need To Think About The Area
The location of your property matters too. While house prices are rising in general, it is lumpy. A lot of people aren’t seeing the value of their homes go up at all, while others are seeing significant gains. If possible, choose an up-and-coming area so you can benefit from appreciation.
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