Is getting on the property ladder really an investment?

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Buying a house is often considered a good move, with many people feeling a certain level of security and satisfaction when they take out their first mortgage. Of course, plunging into the world of real estate is both exciting and daunting, but is getting on the property ladder really an investment or could it cause more harm than good? Let’s delve a little deeper.

Renting versus buying

With the housing market in chaos, more people are renting than ever before. While this is a great alternative to owning your own pad, some singles, couples and families feel that renting is a waste of money. They toy around with a mortgage calculator, trying to work out what they can afford and conclude that putting money in someone else’s pocket is simply a waste of time. Indeed, paying to live in someone else’s home can seem nonsensical, particularly if you have a regular income and a credit rating that won’t send bank managers running, however, it’s important to think how you would benefit from buying a place of your own.

The pros:

  • Once you have paid your mortgage off in full, your home is yours and it could be worth far more than you paid for it, particularly if you bought in a sought after area.
  • If the value of your home increases, you can use that equity to buy a bigger or more luxurious home. Either that or you can downsize and use the extra funds for a more comfortable and financially secure life.
  • It can be difficult to afford rent when you retire, but if you’re mortgage free you won’t have to worry about the cost of your home.
  • You can alter and develop your home as you please (which could add value) whereas you can’t in a rental property, without a landlord’s permission.
  • You can turn your house into the home of your dreams, which for some people is the biggest investment they can have in life.

The cons:

  • You’ll be tied into mortgage repayments and if your financial situation changes for the worse your home might be repossessed.
  • If you don’t have a fixed mortgage agreement, you might be affected by fluctuating interest rates. While there are things you can do to prepare for base rate changes it’s essential to stay on the ball at all times to avoid getting into financial trouble.
  • You will be responsible for maintenance costs such as fixing the roof, repairing a faulty boiler or laying a new driveway. Costly repairs could eat away at your savings, making your home into a money gobbler rather than an investment.
  • The location of your home might restrict what jobs you can apply for and this in turn could impact your financial security. If you want to pack up and move, you’ll have estate agent costs and other moving fees to pay, so it’s worth bearing all this in mind before you take the plunge.
  • Moreover, if you own a house with a partner and your relationship breaks down, it could cost a lot of money in legal fees to ensure everything is straight and sorted.

So, as you can see, while a house could be considered an investment for many reasons, it could also swallow all your money without you even realising it, particularly if it decreases in value. First-time buyers certainly have a lot to think about, but by weighing up all the risks you should be able to make an informed and calculated decision.

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