What Most People Don’t Know About Buying A Home
Buying a home is the biggest financial decision you’ll make in your life – probably. And that means you’ve got to be prepared. But here’s the funny thing: most people aren’t. The following is what most people don’t know about buying a home.
# Don’t Buy For The Life You Have Today
Kelly Phillips Erb over at Forbes emphasises the importance of buying for the life you will have tomorrow. She says that you might stumble upon the perfect home for your needs today. But, she argues, that probably won’t last. She tells her readers to ask themselves some simple questions. Will you always stay with your present job? Do you think you’ll get married? Are kids a part of your future?
She also reminds her readers that buyers may not get any real equity from their homes for several years yet. Depending on the terms of the mortgage, building any equity at all could take more than five years.
# Go Beyond The Glossy Paint
Often a new paint job or carpet is a sign that a home has been neglected. It’s designed to cover up the flaws in the home to make it saleable. But it doesn’t actually do anything to make the home better. As amateurs, it’s hard for potential home buyers to work out whether a house has serious issues lurking under the surface. But an experienced home inspector can.
Home inspectors have all sorts of technology at their disposal. They can use infrared to take photos of walls they suspect of harboring damp. And they can use thermal imaging to detect burst pipes under the carpets.
# Mortgage Interest Deductions Are Usually Small
A lot of people buy a house that is bigger than what they can afford. They tell themselves that they’ll make up for it by taking advantage of mortgage interest deductions. But here’s the problem. Mortgage interest deductions are only available for those who itemize their Schedule A. That’s about one-third of people. So immediately, two thirds are excluded.
But the savings within that one-third are also relatively modest. Even if you itemize, your actual tax savings will be small. If you’re in the 28 percent bracket, $10,000 more in interest will net you $2,800 in saved taxes. That’s not a lot when you consider the overall cost of mortgages each year.
# Purchase Price Isn’t Everything
Brooke Willmes of Space and Company, makes an interesting point on this topic. It’s not just the purchase price of the house that you have to worry about. It’s all the other associated costs. Right now, if you’re living in a flat, you don’t have to pay for appliances and swimming pool heating. And you’re probably not paying over the odds for home insurance either. But when you move, you can expect to pay a lot more in general household expenses. Thus, it’s not just the mortgage you need to think about, it’s everything else too.
Willmes suggests that you compare prices taking into account all the overall costs. Yes, one condo might be more expensive than another. But the more expensive one might come with free maintenance whereas the other doesn’t.