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7 Reasons Why You Should Not Buy A Home
You do not have to dig out old newspapers or magazines to find someone saying that it is now the best time to buy a home. The way these “experts” go about their marketing makes it appear that it is always time to buy now. When prices are deflating, they say that we should take advantage of low prices and buy now. When prices are rising, they say that we should buy now to ride the wave of appreciation. And when you cannot afford to buy now, they advice to start early and buy overseas property that are cheaper as advertised in their brochures. At a special price I might add. Well maybe they are operating on a different property investment dimension to the average individual like me. Because there are a lot of instances where buying a property is not exactly the best decision to make.
1) You are settled in at your rental home. When you are absolutely in love with your current rented home and paying a fair rental, moving will take everything away. You could suddenly be exposed to the afternoon sun, have to manage repairs yourself, and even do your own laundry. And you wouldn’t know if your neighbours are karaoke fanatics or the neighbour on the eigth floor has a nasty dog that barks way into the night until you actually move into the new place. The most important thing of having a home is peace and comfort.
2) You are relocating within 2 years. Job commitments sometimes require us to relocate from country to country as part of the training tour. If you are certain that you will be relocating soon, buying a property is not exactly a wise choice especially if you do not have a concrete backup plan. Firstly, you have to look at the closing costs of buying and selling your home. Even with huge appreciation within 2 years, you could be staring at losses when closing costs are factored in. Generally, the breakeven point is about 3 years. But now with SSD, most people will agree that 5 years is the minimum hold period for any property investment in Singapore.
3) Little savings. You might have an empty bank account not because that you are jobless. But because you keep them in other investments like shares and unit trusts. These days people are taking risks by using all their life savings to pay a down payment. You could be doing the same. But remember that the down payment is not the only cash you need to prepare. There are closing costs, renovation costs, and a whole lot of other costs to prepare for. Let’s not forget that you have the little issue of fluctuating mortgage rates to attend to.
4) Unstable job. When you take up a mortgage, you are signing on to a very long term financial commitment. Your ability to service your mortgage depends on your future source of income. If you have the opportunity to work in an unstable company or hold a position that has a high turnover, you are living in fear of job loss. You can hide that from your family, but you have to acknowledge that risk. That is not really the best way to improve your quality of life. As technology makes more job roles redundant, more companies are comfortable in retrenching employees simply because there is no longer a need for them.
5) Frequent travel. You could be spending more time outside Singapore than inside due to your job or an addictive traveling hobby. Unless you are married and have a partner that is living in the apartment, owning a home can be more expensive than renting one. In extreme circumstances, living in a hotel can make more financial sense to some people. If all you need is just temporary shelter when you are back in Singapore, you can even consider a long term arrangement with a high end hotel at a good price. You get to life in luxury with great facilities and have people to serve you breakfast in bed. Maybe your employer will even pick up the tab.
6) You don’t know what to do with your money. Everyone is talking about properties these days. Even the daily news on TV puts property news as their first segment. When all your friends and colleagues are snapping up the latest condominium launches, it is easy to follow the crowd as they seem like they know what they are doing. You are sure to run into a cowboy that keeps saying that you are losing your money by leaving them in a bank. If you run into this situation, remember that investments are suppose to be pragmatic logical decisions. Not emotional. A huge segment of the property market is overpriced. Whatever is feeding the bull is a puzzle that pragmatists are unable to decipher.
7) Bad personal credit. Buying a home requires you to obtain a mortgage from a lender unless you have a cash reserve that takes up your whole storeroom. If you have credit bills that have been outstanding for a long period of time or have defaulted on loans, it will be wise to do a credit check on yourself before committing to buying a property. You don’t know for sure how loan approvals are determined. Making a commitment to buy a property and later finding out that lenders are avoiding you like the plague is not something that a doctor will recommend for a patient with a weak heart. When you as much as have a small suspicion that you could possibly have questionable credit, it will be prudent to check out your credit status yourself before committing to anything.
As everyone is now somewhat chasing the gold with buying properties, don’t forget that the most important element of a home is the quality of life. Don’t buy a home you cannot afford. And don’t buy just because you are afraid of losing out on an investment opportunity.