Buying a home, particularly when it’s your first, is an incredibly emotional experience. Given the amount of money being spent, this is perfectly understandable. However, for many, money is not the only consideration.
Many first-time buyers expect to get more “bang for their buck”. Sadly these dreams are often dashed when they start viewing properties within their price range and realise that their options are somewhat limited. If there’s one area in which the saying “go big or go home” should definitely not apply, it’s the residential property market.
In fact, says Berry Everitt, MD of the Chas Everitt International property group, homebuyers should adopt exactly the opposite strategy, purchasing only as much home as they absolutely need at that moment, at the best possible price and in the best possible area.
While this applies to all homebuyers, it is a particularly important point for first-time buyers to bear in mind. Remember that first-time homeowners are unlikely to live in the same property forever. Their financial situation will improve, the needs of their family will change and the time to buy a bigger and better property will come – often sooner than they think.
Keep a cool head
“It’s never a good idea for buyers to stretch themselves to their financial limits when purchasing a property,” says Everitt. “This is especially the case at the moment as consumers are facing ongoing and sizeable hikes in the cost of fuel, food and utilities, not to mention the possibility of further interest rate increases later this year.”
Those who extend themselves to the financial limit may find it pretty hard to cope and Everitt suggests that buyers leave themselves some room to manoeuvre if and when these increases materialise. Those who don’t are very likely to find themselves unable to meet all their financial obligations and are at risk of losing the home they have worked so hard to acquire.
Keep it at a quarter
“At the moment, we suggest that buyers should be targeting properties that cost around 25% less than the maximum bond for which they would qualify – a move that also makes it easier to qualify for a home loan.”
That said, he adds that it is also not a good idea for first-time buyers to put off the purchase of a property until they can afford something grand. “The market has passed the bottom of the cycle and is on an upward path at the moment. This means that homes are just going to get more and more expensive and it is going to become harder to qualify for finance, especially if the expected interest rate increases do materialise.
“Buyers should thus be looking to get a foothold in the market as soon as possible, in the best area they can afford, even if they have to buy a much smaller home than they originally planned to. It is far better, for example, to buy an apartment in a sought-after area right now than to delay in order to buy something bigger in that area or worse, to use their money to buy something bigger in a less popular area.”