Is there an optimum time to buy a property? How do you work out the best time to buy? Is there an ideal age at which to buy? How much money should you have? When should you buy to maximise your profits?
This blog considers the best time to buy property in terms of 3 key factors:
- Financial circumstances
- Market conditions.
1. At what age should you buy?
You often hear younger people come up with the excuse that they are “too young to buy”.
You can buy a property from 18 onwards, although you will probably find it easier to get a mortgage when you reach your twenties.
Many would-be young buyers form the view that owning their own home is something of a responsibility they don’t want to have until they are “older”.
Of course, with property prices constantly on the rise, many of them find that when they are older prices are beyond them – prices often rising faster than wages.
There is often the feeling that buying is more expensive than renting and that is offered as a reason to put off buying. However, renting is not necessarily cheaper than buying; it all depends on a range of factors such as location, affordability, interest rates and the amount that can be put down by way of deposit.
2. The advantages of buying young
With property prices typically on an ever upward trajectory, the sooner you can safely buy the better.
Providing you are an adult, there is no such thing as being “too young to buy”. If you want to buy a property and can afford it – you are probably old enough.
The longer you own a property, the more it is likely to increase with value, the greater your capital gain.
Remember that the more family responsibilities you have – spouse, partner, children – the greater your financial burdens. It actually makes sense to buy a property when your financial burdens are at their lowest – before you are weighted down by family responsibilities. Strangely, many buyers do the very opposite.
The important thing is to buy at a price you can comfortably afford without taking mortgage risks which could expose you to mortgage default in the future.
A key ingredient is good budgeting – the ability to manage your expenditure so that it does not exceed your income and put you in debt.
3. Don’t leave it too late
These days it is possible to obtain a mortgage in your sixties and beyond. People are working longer and getting on the property market later.
However, do you really want to be paying off your mortgage in your seventies or even eighties?
The sooner you buy, the sooner you will be able to pay off your mortgage and be in a position to enjoy a mortgage free retirement.
A key word for many would-be homebuyers is “compromise”. Often potential buyers put off purchasing because they cannot afford the exact “dream” property they would like.
Over time, their financial circumstances may improve – allowing them to purchase their first choice property. However, the financial position of many would-be buyers deteriorates with time and they end up not being able to buy at all.
It is therefore important for would-be purchasers to carefully and objectively assess their future financial prospects – and the direction of the property market – and be willing to compromise on their first choice purchase where necessary.
4. How much money do you need?
You don’t have to be massively well-off financially before you buy a property. Of course you will need the deposit or down payment – typically 5-10% of the purchase price.
Further, you need to be able to:
- Comfortably afford the mortgage payments and your other essential outgoings
- Have enough left over each month to build up a reserve for emergencies and unexpected events – such as ill health or loss of employment.
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5. Timing the market v. time in the market
Experienced property investors will tell you that “timing the market” is not something easy to achieve.
A great time to buy is definitely when prices are set for an extended period of increase. But predicting that moment is incredibly difficult.
Certainly you don’t want to buy at the very top of the market– just when house prices are about to fall. But again, predicting that moment is not easy to do.
The better approach is to focus on time in the market rather than attempting to time the market. The sooner you get on the property ladder, the longer your home will have to increase in value. Even if the value falls at first, it is likely to increase handsomely with time.
The best time to buy is probably as soon as you can afford to do so. You can hasten that moment by keeping strict control of your spending and taking every opportunity to save.
Rebel Property Coach
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