Four ingredients for home ownership (spoiler: money's not on the list)
Boomer John Thistleton has bought and sold six homes for a profit in his working life, despite starting with little cash. He shares the four key ingredients you need when it comes to buying your first home.
Money isn’t on the list. That’s because few of us have much money when we begin our home ownership journey. That doesn’t matter. Each step is worth a lot of money, more than you know right now if you are saving for your first home.
The time you spend paying off a loan is up to you. Early in our home ownership quest, discovering we were only charged interest on the principal, and that special payments reduced the principal, saw us lining up each Friday in the bank with $20 to bring down the amount of principal. This reduced a 25-year mortgage to 11 years. Yes, things have changed. Big time. But the same rule applies. Pay down your principal in good time and you’re mortgage-free faster.
Time has another way of aiding the process, too. For example:
We couldn’t afford fences around one of our first places, but when Gary the builder next door asked to go halves in a paling fence, I made the time to help him sink the holes and watch him chip the corners off the top end of the palings with a tomahawk. I learned how to build the fence on the other side of our yard. Millennials are time-poor, but making time to learn valuable skills will increase the value of your investment.
You may not be a builder or need to build, or paint, but you too have the time to help others who can help you, to mind their kids, do a tax return or some other favour in return for something of value for your home.
You’re also going to need energy. Make the most of it while you’re young. Spend your energy renovating, working second jobs, walking a little further to the bus stop or train station because you bought a more affordable place. Even being prepared to walk up an extra flight of stairs will bring you closer to your goal.
The belief tomorrow will be a better day is essential. You must realise that a big mortgage is also a large, rising asset and your skills and knowledge will continue to rise along with it to sustain your conviction through the steep early passages of home ownership.
This month we have been looking at apartments, including west and south-facing ones selling for $20,000 to $50,000 less than north and east-facing ones. When I suggested to a real estate agent everyone wanted a north-facing apartment he shook his head in disagreement.
'Young professionals don’t care,' he said. Then I realised, of course they don’t care, because of an afternoon when hot sun from the west sears through the windows they are either at work, or out with friends making the most of weekends.
Big savings are up for grabs if you’re prepared to think about what is most important in your life. So value your job and your place of work, where you are spending most of your time in your early working lives and when you do buy, do it knowing that your home is only part of what makes your life fulfilling.
Networking means sourcing materials and knowledge on social media. Car pool with family and friends to use fewer cars. Everyone in the network is saving on registration, insurance and servicing.
When we lived near my in-laws one of our first steps was to sell one car and share the second one. Our half of the sale went straight to shaving off more of the principal on our loan.
Living with parents or in-laws while saving for a deposit can be a pain. But the benefits of building a bigger deposit to avoid the need to insure a mortgage makes it worthwhile. These steps are the tip of the iceberg.
Think about them and how they fit your lifestyle, but not for too long. Just get stuck into it.