THINGS TO DO BEFORE BUYING A HOUSE
Buying a property is usually a person’s biggest expense in their lifetime, so you’ve got to have all the t's crossed and i's dotted, so you’ll be happy and not end up in a financial crisis.
Whatever your motivation, check the area, the surrounding amenities, and the selling price. If it’s too high, find one that’s closer to the average price. If the area has social problems, you don’t want to stay there, and tenants will also avoid the place. The building may also have overdue maintenance issues. It’s not worth buying no matter how low the price.
The next step is to be clear about your objective. Is it for own-stay or investment? It’s important to differentiate this.
If it's for investment, you'd have to compare the monthly home loan repayment price against the rental you can expect to get. It’s often said that these days, landlords still have to supplement the rent they receive to make the monthly payments.
That doesn’t mean the investment is a bad one. Because as a landlord, you can also expect that over time, you can charge higher rent, and home prices also generally increase in the long run, and then you can profit from the sale.
You should prepare an excel sheet of the expenses you have to prepare, such as down payment, renovations, furnishing, and maintaining the unit. And then compare that against the rental and capital appreciation you can expect. Is it worth the investment? If it’s worth the investment, consider the opportunity cost (meaning: forgone benefit that would have been derived from an option not chosen). Would it have been easier to just put it in a fixed income fund generating 5% of low-risk returns yearly, for example?
If you’re buying for your own stay, if you like the place and you’re able to afford it, that’s a good enough reason. But, you might also want to think about where you work. You may switch companies someplace else, and even if you stay in the same company, they might move the office. Are you prepared to potentially make a longer commute just so that you avoid moving out, is it worth the trouble? That’s something to think of.
Some people buy for investment and rent the place they want to stay to avoid this dilemma. Of course, renting comes with its own setback of not having full control over the property, such as renovating it to your own requirements.
Once you’ve decided what you want to buy, do some calculations on your debt service ratio. You can find this tool on Google. This is for you to know your loan eligibility, so at least you don’t get too excited about buying only then find out you’re not creditworthy enough.
The last step, you guessed it, is insuring it. MRTA/MRTT will cover the remainder of the loan in the event of death, but you should also check if it has a disability clause, so it does the same in the event of being disabled.