Preparing to buy a home


Rent or buy? Buy! It’s a no-brainer. And the sooner, the better

Rent or buy? Buy! It's a no-brainer. And the sooner, the better

It almost always makes more sense to buy rather than rent a home, simply because, as a tenant, you're paying monthly into another person's pocket what you could be paying into your own bond account.

Home ownership is probably the easiest way for young people to accumulate personal wealth. Why? Because the value of property appreciates over the years, and the size of the outstanding home loan decreases month by month – it's win-win! Plus, you can accelerate this process of personal wealth creation in multiple ways.

One way is by paying an extra amount into your bond account each month – more than the required monthly instalment. A small amount can actually make a huge difference, shortening your bond term – and your outstanding debt – by years.

You can also get the maximum value appreciation for your property by buying in an area where your target price is in the lower tier of current prices in that area. That way, when the market takes a downturn, your home will be less vulnerable. And, during 'hot' market periods, the higher-priced homes in your suburb will help pull yours up. Win-win!

Of course, there are those who believe that the real estate market is not yet at the bottom of its current cycle. They believe that they should wait for home prices to become even more negotiable than they are currently. But even property pundits can't really time the market with any degree of precision, because there are just so many variables to consider.

These include the reaction to major economic or political events, an improvement or decline in consumer and business confidence, interest rate increases or decreases, crime, employment, supply and demand, migration, urbanisation and densification. These 'shocks' can also vary from suburb to suburb! So, prospective buyers should rather set their own purchase agenda and buy when the timing is right for them.

There's naturally some resistance to buying among those who know they're going to have to move again in a year or two. Our advice to them is to use this time to save up for a substantial deposit for a home in their new location.

Banks are currently quite keen to lend to homebuyers – at BetterBond we've been able to secure approval for more than 80% of the bond applications we submitted in the past six months, and almost two-thirds of our applications are being converted into formal bond grants.

It's our multiple-bank submission process, you see. We're able to negotiate the best available interest rate for our clients, and, in the process, cut a substantial amount off the total cost of their home over the life of the bond. So, if you're done with renting and you're ready to buy, call a reputable bond originator to get you the best possible deal.

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