When you have set it on yourself to invest
in a new home you must first stop to think. Bear in mind,
purchasing property is a very emotional experience apart from
a very significant investment. Therefore, I strongly advise
that you should always follow 5 criteria before taking the
issue further:
1. Qualify yourself - Create a detailed list of your requirements.
2. Contact your preferred Bank and check on the loan value
you will qualify for.
3. Calculate the total investment involved - including Stamp
Duty and Notary's fees.
4. Browse property search engines to see what is available
within your budget and requirements.
5. Contact a reputable Estate Agent and start your property
search
Qualify Yourself
This is the first and most important step in the cycle; since
you will be able to obtain a very clear idea as to what you
and your partner are looking for, however, always keep at
the back of your mind the amount you would like to invest.
Remember a property that fits in 100% to your requirements
is impossible to find and you will have do what we normally
do in life: 'Compromise'.
Below I have included a list to help you achieve this:
Use of Property -
1.First Time buy
2.Holiday
3.Buy To Let
4.Retirement
5.Relocation
Property Type -
1. New Build
2. On Plan
3. Re-Sale
Preferred Property Types -
1. Maisonette
2. Flat
Property State -
1. Finished - Modern - Traditional.
2. Shell or partly finished.
Location Type -
1. Town
2. Village
3. Rural
Street Type -
This will vary according to your needs
Number of bedrooms required
Number of bathrooms required
Size of living area required -
1. Open Plan layout
2. Independent Kitchen
3. Sitting/Dining
4. Living Room
Size of outside area required -
1. Back yard
2. BBQ area
3. Garden
4. Swimming pool
Size and type of Garage -
1. Lock up
2. Car Space
3. Underlying basement garage
4. Garage with workshop area.
Type of Views -
1. Seafront
2. Sea views
3. Country views
4. Open views
Amenities required within the area -
1. Close to shops
2. On a bus route
3. Close to restaurants
4. Close to sea
5. Close to beach
Accessibility of location - Short drive to:
1. Work
2. Family
3. Friends
Special Considerations -
1. Wheelchair accessible
2. Health considerations - No hills etc.,
Towns considered
Other Considerations
Amount of Investment being considered Lm
Financial Considerations -
1. Cash Purchase
2. Bank Financing
3. Purchase dependent on sale of present property
4. Re-mortgage
Purchase Within -
1. 3 months
2. 6 months
3. 12 months
Once this is complete one should have a clear idea of what
the requirements are. Then off to the next question - Can
we afford it?
Getting a House Loan
Before you actively start your property search, it is necessary
to study how much you can afford. It is important to determine
what your down payment, closing cost and what your monthly
payments will be. Common practice in the industry is that
a 10% deposit payable on preliminary agreement. Look at various
home loan options and check what interest rates apply. All
local banks provide a detailed assessment before suggesting
a specific package. In the case of standard home loans your
repayment should be in the region of 25% to 30% of your gross
income, with a maximum lending term of 40 years. You can borrow
up to 90% of the purchase price or completion costs with the
property being purchased offered as security. Once you have
established the above, you are in a position to know exactly
the price range you should be looking at.
The next step would be to determine how long you expect to
live in the new home. This decision will not only affect the
home you look at, but also the type and term of loan you choose.
When a quotation is being done ask your bank what fees typically
are included in the finance charge computation, and what fees
may be charged separately at closing.
How much should you budget to own your own home?
Apart from the down payment, the five largest expenditures
involved with the purchase of a home are usually your monthly
loan repayment, home and life insurances (annually), Bank
processing fees (one time), Notary's fees (one time) and stamp
duty (one time). Obviously, the amount of your repayment depends
upon your down payment, rate of interest and the price of
the property.
For example, a Lm 45,000 loan at a 5% interest rate for a
35 years period will run approximately at a repayment of Lm
227.70 per month: the interest rate charged varies according
to the Central Bank base rate.
What about taxes? If you are purchasing your sole primary
residence then stamp duty payable is 3.5% on the first Lm
30,000 and 5% thereafter, otherwise the rate is 5% in all
other cases. A local real estate agent can help prospective
homeowners refine these figures.
At this stage we should keep in mind, that home ownership
is not just a one-way street, -that is, aside from spending
money, homeowners also profit from their property. Of course,
the primary benefit is capital appreciation that builds from
year to year. A home, apart from being a place that provides
shelter, is a profitable investment, and the rising value
of the property provides another "savings" account.
So, when it comes to investing in a new home, remember one
thing ... the purchase of a property requires a lot of - Budgeting
and Planning
What kind of Property is Right?
Before going a step further you should determine the specifics
you want or need in a home. What are your day-to-day and future
needs? Do you enjoy maintenance? Older houses have great charm,
but may need updating whilst new homes offer the latest energy
efficiency and design features and need less maintenance.
Larger plots can give room for additions and swimming pools.
Sit down with your real estate agent and discuss your wants
and needs list. By knowing your price range, your agent can
help you determine in which towns and neighborhoods you can
start looking at. You may find that you are limited to where
you look based on your situation, whilst you may notice that
you have to prioritize on certain needs such as location and
give up on others such as size depending on your price range.
Go to the different listing web sites offered by estate agencies
and search for properties to find out what prices homes are
listed for in areas you are considering. The prices of property
in the area should not necessarily mean or determine the price
of the property you wish to purchase, however it is always
important to check what is available in the area and which
price are these properties selling for. It is also important
to compare the same property in different locations to see
how your properties in your location compare to similar properties
in other locations.
With a list of houses that you can afford to invest in, make
an appointment with your real estate agent to view the interior
of the ones you are interested in. After you have narrowed
down your selection to a few, it is important to visit them
at different times of the day. Visit them during the morning
commute time. If you visit only during the middle of the day,
you might not notice if the street in front of the home is
noisy or not or which kind of neighbours live in the area.
This is also a good time to find out how you emerge from your
residential area into traffic on a thoroughfare or how long
it takes to get to a certain point during rush hour. Go back
after dark and walk around the block. You might notice that
headlights from approaching traffic shine into the home or
hear sounds from a nearby night club, street or neighbours
that you were not aware of.
After viewing a number of homes, you will want to view a
few of your choice for a second time. This is the time to
take measurements, ask questions and carry out a closer inspection.
Should you decide to make an offer, ask your agent for sales
compromises to arrive at an offering price. A "seller's
market" or "buyer's market" can have big effect
on how much to offer. There is not much sense in making a
low offer on a well priced home in a seller's market so one
needs to be realistic.
Remember, investing in property is long term and although
it is a very emotional experience one must always bear in
mind that it is above all an Investment with a capital 'I'
and my advice to readers is: 'Better buy a room in a good
location than a castle in a bad one'.
Trafford Busuttil
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