Buying a Home: Things to Remember

Do You Really Need to Buy a Home?

Let’s do the math of buying a home vs. renting a home.

A home with a price tag of $300,000 has a rent of $5000.

If you buy that home, you will have to pay $24,000 as loan repayment if the interest rate is 8 percent.  

If you rent the home, you pay just $5000 and save $19,000 additional money that you could be paying for your loan repayment. You then invest $19,000 in the stock market.

If you had bought that home, you would have paid a down payment, so, when renting the home, you also invest that month in the stock market.

In 20 years, your $300,000 home will probably be worth $1.2 million and your stock investment will also be $1.2 million.

The mathematical calculation presented here is just an assumption, however, what I am trying to tell is in a financial standpoint, buying a home or living in a rented house does not have a big difference. However, you will have to see this from a larger perspective. When you buy a home, you are under moral obligations to pay the loan, you will have to stay in that home, in the city, and probably do the same job because any financial decision you take can cost you clearly.

4 Things To Do If You Want to Buy a House

One of the major personal finance decisions one will take in his life is buying a house. You need a lot of money to buy a house. For a lot of people, it is not possible to pay for a house with their savings, therefore, they have to look for different ways to fund their house. They can sell their assets to build funds or borrow from banks and financial intuitions. Here are 4 things you need to do if you want to buy a house very soon.

Keep Your Debt to Income Ratio Low: Your debt should be minimal compared to your income. If possible pay your all existing debts before buying a house because when you buy a house you will have debt.

Offer More Down Payment Than Required: If you offer more down payment, you will be paying fewer mortgage fees. Paying fewer mortgages means you have lower debt. This will be possible only when you have a lot of savings.

Choose Mortgages Companies Wisely: This is very important because you need to find a company with lower interest rates and a company that does not increase its interest rates frequently.

Choose a Real Estate Company/Agent Wisely: If you go with the wrong agent, or agency, you might get stuck with the wrong property.

How Much Money Do You Need to Buy a Home

How much money you need to buy a house depends on the housing market in your home country, the location of the house, the type of house, etc. For instance, in my home country, if you are going to buy a house in a good suburb, you will have to send at least $300K. if you do not have that kind of money, you can get a loan to finance your house. even if you are going to finance the house through a bank loan, you will need some money as a down payment, you will need at least 20 percent or $60k to make a down payment.

Buying a Home Through a Loan

Buying a home with a loan is not my idea. When I buy a home with a loan and live in my own home, I will save money on rent but I will incur other expenses such as house maintenance, insurance, tax, etc. Therefore, the house becomes a liability, I do not want to use a loan to buy liabilities. If I want a home so that I can rent it out, and collect rental income, I would be very much interested in doing this because my collecting rent, I will be making money that can not only pay my mortgages but also manage my personal finances.

Buying Home: Is it Liability or an Asset

If you are buying a home for yourself, it is a liability and not an asset. however, if you are buying a home so that you can rent your property and make additional income, you can go ahead and buy a home. If you do not have the full amount to pay for your house, you might have to buy your house through a bank loan, and in the meantime, you will also have to make a down payment. You will also have to pay loan installments for many years, there will be a lot of financial obligations. I think renting a house is better.