You have been thinking for some time to buy your house and get rid of rent, flat mates and living with your parents. This might seem like a great idea, but there are some drawbacks that could make you change your mind.
There are a few myths about home ownership that you should be aware of before making up your mind.
Myth 1. If you buy a house, you get a big tax break
The truth is that, when it an owner occupied property in probably the worst investment as their is no real tax benefits at all. The taxation benefits all come from investment properties. Still your house is your home and there is nothing better than living on dirt that is yours and the memories that come with it.
Myth 2. Buy vs. Rent calculators
If you decided to purchase a house, you must have been curious and used a Rent vs. Buy calculator. If you haven't, don't bother, as most of them are meant to promote home ownership and only show the financial advantages of buying a home compared to renting it. Sometimes depending on your circumstances its better to rent for a period of time rather than outlay capital for a deposit and have the higher monthly cost living cost.
Myth 3. Property prices will always go up
Like anything else that can be sold and purchased, a property will always be a cyclical investment. This means that there will be periods of stagnation in some markets, followed by a rapid increase. For example, the prices for property in the mining towns around Australia have decreased by 50% since 2012. Although the overall value of property may see an increase, things are entirely different in individual areas, such as the CBD, regional, suburban and outer suburban areas.
Myth 4. You will get the best deal for a 30-year fixed mortgage
This can apply only if you plan to keep the house for 30 years. If you intend to sell it after 5 or 7 years, a fixed rate for seven years would be a better choice. The longer the period of fixed rates, the higher the interest would be. This means that you will pay a bigger price for nothing. Read our article on fixed home loan rates vs variable.
Myth 5. Making money from property investment is 100% sure
Maybe this was true in the past. Today, the increase in the macro market means that some towns and cities will go up while others will drop. Even if the value of a property has increased, this does not mean it has delivered a profitable return. A market that goes up only a few percent annually will faintly cover inflation and your taxes for holding the property.
In conclusion, when it comes to property investment, one should weigh all the pros and cons, do a thorough market research, and consult with some specialists, so to avoid making a decision that you could later regret. This is the best way to achieve success in property investment.