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In today’s economy, where real estate prices are skyrocketing and it’s tough to cater all the expenses each month, it becomes tougher to save a sufficient amount of money to invest. Likewise, millennials are also facing the same problem, a little intense version as they have to take care of their student loans and other basic necessities before jumping into the road of investment. However, according to the updated data from real estate service, it shows that millennials are eager to own a property. But they are financially not stable enough for that responsibility. It is shown that more than 25% of Millennials who are planning to purchase have less than $1000 in savings, which is hardly sufficient for a down payment.
As a young buyer with limited savings, you should take it as a signal that you are not yet fully prepared for homeownership. Property investment requires patience and discipline, jumping too quickly will leave you with risks of failing to keep up with your housing expenses and ends your journey before even it starts.
Savings Are Essential
Savings are a key in buying your very first home. If you don’t have a sufficient down payment, you will be denied the option to buy one. 20% down payment is usually required by conventional mortgage lenders, it’s possible to get a home loan with a lower down payment. For example, if the down payment is as low as 3% and you are looking to buy a $100,000 home, you’d still need to have $3000, which means if you have less than that, you don’t have enough.
If somehow you are able to arrange enough for a down payment by borrowing it from parent or grandparent, you still need to have a backup plan for an emergency fund. When you own a property, the risks of costly repairs usually exist. Or if unfortunately, you lose your job, you will need a way of paying for your home and other expense while you are without an income.
It is smart decision to have enough in your bank account to cover four to six months of necessary living expenses, but you are not much ready to own if you are a homeowner and don’t have $1,000 in savings.
Better Wait then Jumping Unprepared
Buying a home before being fully prepared will leave in a pool of financial stress and many unfortunate consequences. So, it’s better to wait for a year or two to meet the following objectives;
- A sufficient amount of money for a 20% down payment on a home if you’re getting a loan.
- A sufficient amount of money for loan’s closing costs i.e. 2% to 5% of the loan’s value.
- A sufficient amount of money to cover at least four months of living expenses.
Following these objectives will give you a safe cushion in case of any unforeseen circumstances and helps you to stabilize financially.
Like any other business, property investment is a journey filled with challenges but with the right knowledge and proper planning, you can get healthy returns. To make your way in the property market, reach out to the expert property investment strategists in Melbourne at 10 Properties in 10 Years. Get step-by-step guidance and tailored plans to build an amazing property portfolio. Find out more at 1300 617 677 or send us an E-Mail: [email protected].
