Should the First House be Cheap?
When you are thinking about purchasing your first home, you are probably most concerned about the cost of the house. Do you spend a lot of money on a home that you might only be in for a few years, or do you spend a little money on a property to hopefully make money on when you sell? Here are some guidelines to help you decide.
Buying a large house right away has the potential to earn you a profit, as long as property values increase. If you buy a large property when interest rates are low and it is cheaper to borrow money, you have an excellent opportunity to improve your financial leverage and increase your wealth. In addition, buying a large property from the beginning could save you buying and selling costs down the line, especially if you buy a home large enough to grow into. However, buying a larger property does not always mean that the property’s value will appreciate. In addition, if interest rates increase and your property value is still the same (or lower), you could struggle with the higher repayments.
Buying a smaller house can save you money in the long run. With a 30-year mortgage, you can gain equity as interest rates and property value change. As interest rates increase, you can pay off your mortgage faster, resulting in savings and not being in debt as long. However, if you do need to buy a larger home down the road, you still need to worry about your home’s buying and selling costs.
Before purchasing a home, consulting Mortgage House and our team of brokers can help you decide what amount you can spend on your home. In addition, we can help you assess the advantages and disadvantages, debt factors and the chances of capital growth to help you make the most financially wise decision for you.