Choosing the right time to go from renting to buying.
Deciding when to transition from renting to buying can be daunting—and in the current economic climate, even those with the financial means to do so are unsure if now is the right time to do so.
While there is no ‘one-size-fits-all’ answer, there are several key factors that one should consider when determining whether it’s time to make the switch.
Recent data from Lightstone shows that many homebuyers are taking a cautious approach and making their first home purchase later in life. Ten years ago, most first-time buyers were in their late 20s (average age 28). Now, the majority of first-time homebuyers are aged between 30 and 40.
Another change in the first-time homebuyer profile over the last decade is the rise of single homebuyers. 72% of first-time homebuyers purchased homes on their own in 2023, according to Lightstone.
Waiting until later, when you are financially stable, gives you the time that you need to save up for a sizeable deposit. In turn, this brings with it a host of benefits, such as reducing your monthly repayments.
However, irrespective of your age, here are five signs that you’re ready to buy a home:
You’ve assessed your affordability
Use free online tools such as bond, repayment, and transfer costs calculators to see if you can afford the upfront costs of purchasing a home. Additionally, assess whether your income can comfortably cover monthly repayments and other homeownership expenses without straining your budget.
You’ve thought long and hard about your future plans
Consider your long-term plans and how they align with homeownership. Are you planning to settle in the area for the foreseeable future? According to Lightstone, the majority of first-time buyers stay in their homes for 20 years, but if you have a shorter period in mind, it is nonetheless recommended that you stay long enough to offset the upfront costs.
You’ve assessed market conditions
Study sales data for your desired area to understand the average sales price for homes there, as well as how long they’ve spent on the market.
The current market conditions are advantageous for first-time buyers due to slow house price inflation and competitive lending behaviour from the banks, but the high-interest rate environment and the possibility of future rate hikes must also be taken into account.
You’ve put aside money for a deposit
A minimum 10% deposit is recommended, but many first-time homebuyers are now putting down bigger deposits to show their commitment to both the seller and the banks.
It is advisable to delay your purchase until you can put down a deposit, as this will reduce the total cost of your loan and help you to negotiate a better interest rate from your lender. Another option to maximise your deposit is entrusting it to an interest-bearing account.
You’re ready for the additional responsibilities
Reflect on your lifestyle and personal preferences, because buying a home means taking on additional responsibilities like maintenance, repairs, and property management. Consider whether you are ready for these commitments, and if you value the stability that homeownership can provide.
First-time homebuyer’s checklist
For those who are unsure of where to start, it is suggested that you follow this simple checklist:
- Get your finances and paperwork in order. Build your credit score (if necessary) and be sure that you have all the documentation required for the lengthy home loan application and purchasing process.
- Identify your needs and wants in a home. Make a list of your priorities and separate them into either ‘must-haves’ or ‘nice-to-haves.’
- Begin your search. Start searching for properties online and attend in-person viewings. Keep track of the properties you visit, noting their pros and cons to help with comparisons.
- Do your due diligence. Once you’ve found a potential home, conduct a thorough inspection (preferably with a professional) to identify any defects before making an offer.
- Make an Offer to Purchase. This should include all conditions of sale, including your intended purchase price. Remember that once signed, the document is legally binding for all parties involved.
- Secure financing. Working with a bond originator or your bank to secure a loan at a competitive rate to fund your purchase.
- Ensure that your deposit is secure. Too often, deposits fall victim to phishing scams because of poor cybersecurity. A secure and transparent platform removes this risk and gives you peace of mind.
Buying a home, especially a first home, is often an emotional decision. Consider whether you feel ready for the commitment, and if you are excited about the prospect of owning your own home.
Written by Jackie Smith
Jackie Smith is a financial expert.
While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.