What late-blooming homeowners need to know
Although most people have learned a considerable amount by the time they reach their mid- to late-thirties, they may not know much at all about buying a house.
That’s because the age of first-time buyers is now much higher than it was a generation ago, and is still rising in many parts of the world thanks to high levels of student debt among people in their 20s, and a simultaneous trend towards later marriage and family creation.
In SA, for example, the latest statistics from BetterLife Home Loans show that the average age of first-time buyers is now 34. And what that means is that they often also have quite different needs – and financial concerns – from those their parents had when they were acquiring their first properties.
Good schools and short commutes, for example, are likely to be much more important, and not only because these often serve to underpin local home values.
Today’s first-time buyers know that an area with great public schools can save you from having to send your children to costly private schools – and what a difference this could make to their family finances in the future.
In addition, thirty-something buyers are more likely to be settled or settling into a career at a particular company and looking carefully at their commute times, especially if there are two income-earners who must travel in different directions to get to work.
And on top of that, such buyers are often not contemplating a second home purchase until after their children have grown up, so they have to be especially careful when making a choice between urban or suburban living. City living would most likely enable them to cut down on commuting and spend more time with their family, but would probably also mean a higher purchase price and less space and freedom for growing children.
On the other hand, while suburbia tends to offer great value these days as well as child-friendly gardens, living there may well mean having to spend much more time and money to get to work.
Next, buyers in their 30s have to manage their finances more closely, taking into account things like saving for their children’s tertiary education and their own retirement. They may have more established careers and earn more than the previous generation of first-time buyers, and they may well qualify for bigger home loans. But just because they can borrow more does not mean they should.
When calculating how much you may borrow, lenders don’t always include such financial necessities as retirement or university savings and future home improvements, and buyers in their thirties must be realistic about the additional financial responsibilities they will face as they age by not taking on a monthly payment that leaves them too little financial leeway.
And finally, the thirty-somethings must try to avoid draining their savings to cover a deposit and transaction costs such as transfer duty, bond registration and legal fees, which usually have to be paid in cash. Doing so leaves buyers vulnerable to major unexpected expenses or events like major surgery for a child, job loss, or sudden disability.
Indeed rather than put their savings at risk, they should find a lower-priced home and/ or one that will require less expenditure on upkeep.