Property Virgin? Get it right the first time
Buying a house is a huge decision, especially if you plan to do it Trini-style, which means buying the house you will live in for the rest of your life upon your first foray into the real estate market.
However, there is a growing number of people who are starting to look at smaller properties, as a stepping-stone towards something bigger later on. Whether this is out of necessity or some sort of investment strategy is anybody’s guess, but either way, there are a few things all property virgins need to consider before jumping headfirst into searching for a house.
Know how much you need to save
Before you start to fantasize about the number of bedrooms you want, and the epic house limes you can throw when you get your own place, you need to be realistic about how much money you need to have saved. Everyone knows that they need to have a down payment that is equal to roughly 10% of the value of the house they want to buy, but not many people think much further than this.
Unfortunately, the cost of buying a house does not end there. You need to have money set aside for closing costs, which include transfer fees, lawyers’ fees, and a host of other expenses, which usually amount to about 1.5% of the cost of the house. Then there is the minor matter of stamp duty. In Trinidad and Tobago, buyers incur a tax of 3% of the value of a property above $850,000 but less than $1.25 million. This is the bracket most new buyers may be looking at. For more information on stamp duty though, you can check out the Inland Revenue Division.
Get ready financially
Buying a house is a huge financial commitment, and one that you must be ready for. Stamp duty on a house that is $1.2 million would amount to around $10,500, and then you need to factor in your down payment of $120,000, and closing costs of about $1,200. If that makes your head spin, you need to take a step back to figure out how much you can qualify for in the first place. Commercial banks use a number of factors including your salary, job stability and how many loans you already have to determine how much they will lend you. So you may qualify for more or even less than you estimated on your own.
Shop around for your mortgage
Banks usually offer similar mortgage rates. However, the terms of repayment can differ vastly. Some of them allow you to make prepayments, while others make it difficult. Some can take your payments fortnightly, while others only offer monthly mortgage deductions. Explore your options to find the terms that are best for you.
Will you buy and hold?
Will you operate like the typical Trini, and look for a house you can grow into and raise your family in, or will you buy something that will do for now? Both approaches have advantages and disadvantages, but the decision has to be unique to your circumstances. A single home purchaser may decide to rent their property, while a married couple may be buying with space for children in mind. Based on your long-term goals, you’ll know which option to choose.
Look beyond the first impression
When you eventually start looking for a property, try to ignore the interior decorating of the place. It might be hard to overlook ‘granny curtains’ and a cluttered sideboard full of tiny ornaments, but it pays to block those things out of your consciousness. When you can look beyond the paint and the seller’s furniture, you can actually see the potential in a house that might otherwise be overlooked.
Expand your options
You might be tempted to commit to a particular area or even one type of property, whether it is a single family home or a townhouse, but expanding your horizons might expose you to things you didn’t think you would like or be able to afford. Keep an open mind when house shopping. Sometimes, you may stumble upon a property that differs from what you originally planned to purchase, but can actually work well for you.
Stepping onto that first rung of the property ladder is exciting, but you should not allow yourself to start the climb unprepared. Do your research and soon enough you’ll be able to help your friends through the property maze with pride.
Natalia Jones publishes dcaribbeanentrepreneur.com, which features business tips and news for upcoming entrepreneurs across the Caribbean.