Timing Your Investment
Buying a house is a well-considered undertaking that requires planning and a good understanding of the marketplace. For many people, purchasing a home represents the biggest single financial holding in their portfolio.
In the UK, more new homebuyers are coming to market due to the increasingly popular Help to Buy schemes introduced by the government to boost the housing market and assist young people in getting on the housing ladder. Help to Buy allows qualified applicants to purchase new or existing property with relatively low deposits, with the help of a government-backed loan. This is in contrast to having to wait until the buyer has saved 20 percent of the purchase price as a deposit.
Help to Buy has brought new buyers to the market but has also helped boost prices of property across Britain. However, if 2008 has taught us anything, it is that home prices do not consistently rise forever. Buying smart is still important.
The housing market is like other markets. Successful investors buy low and hopefully have the opportunity to sell higher in the future. When all is said and done, the housing market is fuelled by supply and demand. When supply is high and demand low, prices are lower. When demand is high and supply is moving rapidly, prices are higher.
One of the most important factors in buying smart is location. Buying in a neighbourhood that will appreciate in value is critical to the return on your investment.
The best time to purchase a new home is when the buyer understands the marketplace, understands the mortgage process, has good credit and sufficient income and is dedicated to purchasing and maintaining the property responsibly.
Understanding the mortgage marketplace is equally important to understanding the housing market. If you understand the Help to Buy program and would not be able to buy for a few years without it, this might be the time to get involved even if prices are higher, as there are also multiple tax benefits to this scheme.
At the same time, if you already own a property but have always wanted to live in a specific neighbourhood and a property comes to market that will most certainly appreciate, why not move now?
Planning to Purchase
First homebuyers and person buying who own an existing home, or who have owned before, go through the same planning stages. The process begins with understanding the marketplace and defining your needs.
Many factors enter the planning process:
- Value of neighbouring properties
- Quality of community services
- Mortgage expenses
- Property taxes
- Bedrooms in the future
- Structural weaknesses and strengths
- Yard and landscape
- Quality of baths and kitchens
- Cost of repairs or extensions
Homebuyers should view every property with some pretty definite ideas as to what they must have in their new residence. They should understand their budget and stay within the planned parameters.
The homebuyer’s negotiating power is stronger if they have a pre-approved mortgage. Visit one or two mortgage lenders and become familiar with the new lending and application criteria and all the costs associated with acquiring a mortgage.
Homebuyers may be inclined to do business with their current bank but this is a very competitive marketplace. In most cases, it is worth visiting several banks and receiving information before applying to one or two. Once you have a pre-mortgage approval, you are in an excellent negotiating position.