Wednesday, November 08, 2017

Home Buying Tips For Different Stages Of Life

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Your home ownership goals change as your life progresses. Those in their twenties are probably just getting their foot on the property ladder; thirty-somethings might be planning for their growing families; while forty-somethings could be on the market for investment properties.

Home Buying Tips For Different Stages Of Life

Being in a different stage of life would result in potential mindset for each particular homebuyer. For example, you are expecting those in twenties to be purchasing their first HDB BTO flat instead of some fancy private condominium instead.

The same could not be said about those who are probably in their thirties.

1. In Your 20s

As a twenty-something, you’re likely to be a first-time buyer. Assuming you didn’t inherit a fortune, and only entered the workforce recently, your finances are going to be tight.

Not only do you have to set aside the down payment, but there are also renovation and furnishing costs to consider. The wiser option would be not to overstretch your abilities to afford a BTO.

Potential homeowners at this stage should adopt pragmatism and buy only what they can afford realistically instead of what they think they can afford.

The hefty amount required for down payment and potential renovations for the future home could actually cost a significant amount.

Once you’ve worked out how much you can afford, evaluate the different loan options available. One should consider all the available financing options to purchase their first HDB BTO flat.

Different banks have different terms and conditions for the loan. It would be beneficial for the buyer to read and understand all of them before selecting the form of preferred financing for their HDB BTO.

Then consider whether a fixed- or variable-rate mortgage is better suited for your goal in mind. Fixed rates provide stability, but if you plan to keep the property for less than 10 years, a variable rate might work in your favor.

Depending on how you navigate the waters, you should consider to pick the type of financing that suits the most with your repayment abilities.

Given the transaction costs, agent fees and fluctuating market conditions, there’s no guarantee you’ll make a profit if you flip the property after a few years.

Conventional wisdom has it that buyers should hold on to their properties for a minimum of five years. (In any case, HDB’s Minimum Occupation Period only allows sellers to put their flats on the market after five years).

This allows you to build equity as well as gives the property time to increase in value.

2. In Your 30s

Now that you’re in your thirties, an upgrade seems to be in order. This is when you might be planning for a bigger home to accommodate your growing family needs.

More space equals more luxury, but other factors also come into play, especially for those with young kids in tow. As a parent, you should opt for a property located nearby to education hubs in order to accommodate your kids.

Occasionally, you might have achieved some form of financial comfort and would want to have a better and more desirable address.

However, some consideration should be taken into account such as the relevant costs involved in purchasing a new property or BTO.

If you are those who are lucky enough to be eyeing a brand-new EC (Executive Condominium), do note that banks will lend based on their Mortgage Servicing Ratio (MSR) or Total Debt Servicing Ratio (TDSR) limit, whichever is lower.

It’s also important to time the sale of your existing home with your new home (if it’s a resale unit). Negotiate your move-out and move-in dates with the buyer and seller, respectively, to ensure a smooth transition.

If you’ve not finished paying off your existing mortgage, consult your financial adviser about a bridging loan. Making any errors at this stage could be costly in terms of financial perspective.

3. In Your 40s

In your forties, it’s time to reassess your needs, depending on the stage of life you’re in. If you’re a couple with no kids or are soon to be an empty-nester, then consider a smaller property.

Downsizing has many advantages: lower mortgage payments (and therefore lower monthly expenses), lower home maintenance (for example, conservancy fees, utility bills and general home upkeep), more cash to spend on traveling etc. At this stage of life, you should know what exactly you want in a property.

Having established yourself in your career, you could also be keen on additional properties for investment.

However, don’t take on a second property if it will affect your retirement plans. You might have the extra cash now to afford a second loan but the same can’t be said if something happens along the way.

You could also consider to refinance your property if you really intend to purchase a second property.

Refinance could perhaps yield you a better offer than getting a brand new mortgage loan from banks at current market’s condition.

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1 comments so far

I've been thinking about buying a second place lately and this has read has given me another perspective and things to think about. Credits, loans, etc - can be quite confusing for the regular people. Thanks!

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