Ah, ‘home sweet home’. Even the sound of it is so comfortable and relaxing. For many young working adults, there exists the struggle between renting a place to stay, or buying a place to call home. In the end, many opt to rent as it places a lighter strain on monthly expenses, and only decide to buy when they have plans to start a family. As such, with relatively low pay and rising property costs, buying a house just seems like a far-away and impossible dream.
#1 – Can you afford it?
“It” meaning the initial (10%) down-payment, plus legal fees, real estate agent fees, and other miscellaneous costs. That will add up to a significant amount, and you’ll have to be able to pay the large sum up-front while still having enough savings in your bank account to cover emergencies such as personal health, family matters, or car repairs.
In contrast, deciding to rent will set you back an initial payment amounting to 3 months rent (first month rent + 2 months deposit), plus maybe some extra for legal fees. Definitely less than paying the up-front sum for a house.
#2 – Do you have a stable income?
Having a stable income is the keystone in buying property and paying off your monthly installments.
If you don’t have the money to pay off your mortgage, you are at risk of losing your house. On the other hand, if you are renting, in the event that you are unable to pay your current rent, you at least have the option of moving out and searching for more affordable options to suit your income.
#3 – Are you prepared for the commitment?
Besides the monthly mortgage payment, owning a home comes with other expenses such as quit rent, land tax, maintenance fees, utilities, and emergency repairs. Factor in other things like insurance, renovations, furnishings, groceries, and household items, and you’ll find that the numbers add up to a significant amount.
#4 – Do you plan to live there for more than 10 years?
Buying a home is as much an emotional decision as it is a financial one. If you plan to live in a particular area for more than 10 years, or planning to start a family and settle down, buying a house is definitely one of the main priorities. Generally, it is estimated that a homebuyer spend at least 4-5 years in a home to offset the costs of the purchase. On the other hand, if you are the nomadic type who can’t seem to settle in one place for long, or simply don’t know where you’ll be in the near future, it’s best to keep your savings and don’t let yourself be tied down with an asset that is difficult to liquify.
Also, if you love staying in a particular area but can only afford to rent there, the wise decision would be to search for more affordable alternative housing in surrounding areas if and when you decide to purchase. Remember #1 – think about whether you can afford it.
#5 – Are you prepared to be your own landlord?
When you’re renting, you don’t have to worry about maintenance fees, land tax, legal fees, and all the nitty-gritty details involved with being a landlord or houseowner. Leaky plumbing, broken fences, faulty electrical devices… all these can be reported to the landlord and they’ll handle the rest. However, when it comes to living in your own house, you’ll suddenly be aware of all the time, effort and costs involved in caring for your abode, in addition to dealing with and solving problems on your own.
#6 – Do you have other financial goals?
Maybe you plan to start a business, or buy a car. To many, having a car is more important than buying a house, purely because it is a means to get to work and earn a living. For others, postponing a home purchase to finance a startup business may prove to be a better choice, as the burden of a mortgage may affect their pursuit of other financial goals. In fact, if there are any major life transitions coming up, it may be best to hold off a purchase and see what happens first.
#7 – Do you really want it?
The typical Malaysian mentality is to have a good job, drive a nice car, buy a house, and start a family. This is also a major cause of stress and peer pressure to many young adults, as they under pressure by friends and family to be ‘successful’ and maintain a good image by having all these things. This causes them to make decisions that their finances are unable to keep up with. It is important to keep in mind that major decisions like buying a house should be YOUR own decision, not theirs, and certainly not something done just to fulfill other people’s expectations.
In a nutshell…
For fresh grads, my advice to you is one word: SAVE. Sure, you might not be able to afford buying a home right now, but save for the next 5 to 10 years and you’ll find that maybe, just maybe, it doesn’t seem so impossible after all. Once you’ve accumulated a tidy nest of cash, enough to cover the initial down-payment and legal costs, as well as leaving extra for emergencies, you can consider buying a place to call your own…
…because the truth is, what’s better than being able to finally call a place your very own ‘Home Sweet Home’?