Real estate is a huge financial investment. For many people, their home is the most valuable and expensive asset that they own. Others use real estate more liberally, purchasing commercial properties for their businesses or multiple residential properties to rent out to other people.
Regardless of what steps you take on the property ladder, you will always need to raise money before making a purchase. Here are some tips to help you through the process.
Are You Selling a Property?
The first thing to consider is whether or not you are selling a property before buying another one. Most homeowners raise the majority of their funds by selling their previous property, using the profits to fund their next home.
Before you put your current house on the market, you will need to do what you can to get the highest return possible. Make sure that it’s in great condition so it attracts buyers. This will ensure that you have more money to play with when making your next purchase.
Even if you are raising much of your funds by selling a previous property, you will still likely need to raise money for an upgrade or other properties. If this is your first purchase, then the following steps are even more important.
Setting a Budget
Every large investment requires the buyer to set a budget. By setting a budget, you ensure that you don’t overstretch your funds. This can result in disaster, as you may end up with a property that you can’t afford, too much debt, and a difficult journey to lessen your losses.
When setting a budget, make sure that you factor in ongoing expenses and other things that could crop up. If the property needs work, for example, you should include this in the budget.
Regardless of whether you plan to pay by cash or using a mortgage, you will still need to save some money before making a purchase. Most mortgage lenders and buyers require a deposit and, the higher the deposit you can make, the more money you will save in the long run.
When setting the budget for your purchase, it may be beneficial to also set a budget for your lifestyle to help you to save this money. Typically, it’s best to save at least 10% of the value of the property to cover the deposit, but other expenses meant that you should be aiming for about 20% if possible.
Getting a Mortgage
The majority of people use a mortgage to borrow the money required for their purchases. You can find out how much house can I qualify for before having to formally apply for a mortgage, which will be helpful when setting your budget and deciding what property to purchase.
Along with your deposit, which proves your responsibility and seriousness, a mortgage broker will factor in your income and will likely do a credit check. If you’re seen as a more responsible lender, then you will get better deals.