Why are you buying?
And don’t say it’s because you want to!
It may seem like a silly question to ask why are you buying, but it helps to put your purchase into perspective. Many property purchases (and those we missed out on) are invested with strong emotions.
When we look at a property it is easy to fall in love with a property.
Don’t deny it, you know what I mean; that property you just have to have. I have done this so many times. And so many times I have been disappointed not to get the property.
That feeling of being attached to a property, of imagining yourself living in the property, of renovating the property in your mind and imagining what you would do with the property if it were yours is strong when you are looking to buy.
But if you stop to think about why you are really buying, that property may not seem so compelling anymore, and you may start to change tactics for what you are buying. You’ll look in areas you might not have considered before, you might lower your expectations for the inclusions you have to have, and you’ll take out some of the emotional part of buying because you’re buying for a specific purpose rather than a property you fall in love with.
Once you ask yourself why you are buying, sure, it may not make these feelings go away completely, but it can start to put home buying into perspective for you and take out some of that emotional part of buying.
Consider this:
If you are purchasing a first home, what would be important considerations for you?
You’ll know that it’s not going to be your forever home and so you might be more willing to make concessions. For example, you may consider buying something further away from the city, further away from your ideal area, or to settle with something smaller (like an apartment) as opposed to buying a big home immediately.
Or you may decide that because it is a first home purchase that you can take advantage of government or developer incentives for first homeowners.
On the other hand, what would you look for if you were buying an investment property?
Does this look different to buying a first home? If you’re buying an investment property, you might be willing to buy a property without all the high-end finishes, you may be more willing to look for something easier to maintain, and your priorities may be around access to public transport, schools and shops.
Alternatively, if you’re looking for a holiday house, you might be happy with an apartment so you don’t have to mow the lawns! Or maybe you’ll focus on something that can be rented out if you need it to be. Or even a property you can see yourself living in when you retire (such as a single storey dwelling).
On the other hand, if you are buying because the interest you pay is cheaper than the rent you are paying, then maybe you are looking for almost anything and you don’t necessarily have to pay it off in five years (but you would like to do it relatively quickly).
What about buying a house to renovate and sell?
You can see how thinking about why you want to buy changes the kind of property you might look for.
The reason we bought our first home was because it was our first home; it was something we wanted to pay off quickly, it was a property we wanted to take advantage of with government incentives (as a first home buyer at the time, you didn’t have to pay stamp duty on properties under $500k—which meant we only considered properties under $500k).
We were willing to buy in an area outside of our ideal area (the property we purchased was well outside of our ideal area—over an hour’s drive). For us it was a first home, not a forever home. So we purchased a home that would be easy to maintain—single-storey, small yard, easy garden.
It didn’t make sense for us to buy a large home and get a big home loan when we only wanted to live in it for a short amount of time and pay it off quickly.
In doing this, we saved ourselves hundreds of thousands of dollars in interest. And in the meantime, we saved a very healthy deposit for a home in our favourite area.
When we purchased our second property, we had new reasons for buying. This time we wanted to live in our favourite location. It wasn’t possible for us to buy a property in that location and pay it off within five years (because the area was expensive), but we purchased because it was cheaper to buy than to rent and we set ourselves a new target for just over ten years to pay it off.
This time we weren’t set on buying a property we could pay off in five years. We applied the same principles to make the process much faster than it would have been otherwise.
Take a minute to think about why you want to buy and write that down somewhere. Here are three questions you can ask yourself to get you started:
- Finish this sentence: I am buying because…
- Thinking about your reason for buying, describe what are you looking to buy (e.g., smaller yard, single-storey)?
- Which suburbs outside of your ideal area are you willing to consider?
When you’re looking to buy it’s easy to lose sight of the bigger picture of paying your home loan off faster and to get lost in the dream of the big house in your favourite suburb straight away. Our friends had bigger more expensive houses, but it didn’t matter to us. Here’s how you too can ignore the Joneses! We knew we weren’t going to live there forever and we were comfortable in our home. You don’t have to have the biggest and best house when it is your first home.
It may not be your forever home!
That big house in your favourite suburb might happen one day (and maybe you are working towards that), but it doesn’t have to happen right now.
When you are starting out, you need to set yourself up so that you can buy your dream home later. If you buy a bigger place now, it will just mean it will take you longer to buy your dream home later.
Whenever you feel the urge to just buy the bigger better house, remind yourself of your why. This can help you feel grounded when those emotions run high on that property you have to have.
Once you’ve thought of your why, you’re ready to rethink how you think about home loans.