BUY A STARTER HOME OR WAIT FOR YOUR FOREVER HOME?
A starter home is a property that will suit your needs for approximately the next five years or until your circumstances change, whereas a forever home is a property that you can see yourself living in indefinitely – or at least for the next 20 to 30 years. The question is, do you hold back until you can afford your forever home, or do you take the plunge with a starter home?
Reasons for buying a starter home
In today’s market, it may take several years before a household is earning enough to purchase their dream home. What’s more, home prices will continue to increase, so something that is not affordable now might be potentially even less affordable in the future. But, once you are in the property market, it is easier to build from there, as property is an appreciating asset that will help you afford the upgrade later. There is also the option of keeping your starter home as an investment property and renting it out as a form of passive income.
It is a good idea to pay more on your bond instalments to reduce the bond term and the interest payable. An additional payment of just R300 on the monthly bond repayment can reduce a 20-year bond of R500,000 by almost four years. Budgeting for this extra payment also helps you to be prepared for future interest rate increases. Ultimately, the more you are able to lower your debt on your starter home, the more profit you’ll earn on the sale which you can then use towards purchasing your forever home.
Reasons for waiting for a forever home
An advantage of waiting is avoiding the chance of being stuck with a property in a bad time to sell and being unable to move up. You also have the flexibility of renting that allows you the freedom to travel while you’re working on building up your salary to be able to afford your forever home.
Rent a property that is reasonably priced so that you can build up as much savings as possible to put down a sizeable deposit. The larger deposit you can put down the better, as this will reduce the monthly bond repayment.
When you are ready to buy, contact an estate agent to help you in your search for a new home.