Buying a new house or apartment can be somewhat daunting as there are so many aspects to keep in mind. What are brokerage or agent fees? Is a lawyer required for the property transfer? Can I afford the home of my dreams? These are just some of the questions a first-time buyer will be confronted with. However, the process is actually easier than you might think. There are a handful of issues that you need to know so as to not make a mistake and find yourself in over your head at some point down the line. Let’s have a look and answer some frequently asked questions.
What are Brokerage and Agent Fees?
The agent fees are a percentage of the total property cost that you will pay to the estate agent or property management company. The agent or management company decides on this amount and it’s usually a percentage between four (on the low end) and twelve percent (on the high end) of the sales price of the house. It is already included in the price advertised and lucky for the buyer, the seller is the one who pays this fee. The amount you see advertised online is the total amount you should pay, plus the transfer costs, meaning the fees related to transferring the property into your name from the previous owner’s. That leads us to our next point.
Is a Lawyer Required for the Property Transfer?
In short, yes. You are going to need a property and transfer lawyer to make sure that everything is above board and legal. The transfer costs are essentially based on the value of the property, in other words you will a percentage of the total cost based on your property value. Depending on what country you reside in, there are brackets that the price of a home falls into, and that determines the brokerage fee. Expect to pay around 5% extra above the advertised price of the premises you are looking to purchase.
Can I Afford the Home of My Dreams?
This is a very good question that some people may not ponder enough before buying a property. The first thing to consider is the deposit, as the bigger your capita deposit, the less you are going to have to lend from the bank, and the less interest you will be paying on your mortgage loan. Ideally, you’d like to have twenty percent as a down payment, while fifty percent would be even better. Think about it like this, every month that you lend money, you first and foremost pay back the interest. The result is that many people pay towards their mortgage for years and years, and are almost at the same amount they started with due to the interest. Therefore, future home buyers have to understand mortgage and interest rates—that is step one, even before looking at pretty images of houses.
Let’s say you have a deposit in the bank and now also understand the rate structure: that’s really fantastic! Next, it’s time to see whether you could actually afford to pay your mortgage for the amount of time you’ve signed for (usually twenty years) in the unfortunate event that you lose your job or have other unforeseen costs. The aim is to own your house outright as fast as possible so minimize interest. So, if you can’t afford to pay your mortgage after, let’s say, eight years for whatever reason, perhaps a two-salary household became one, and you now have to take out a second loan on your house, then the purchase wasn’t a good idea to begin with and it would have been more beneficial to buy a home in your price range, something that you can still pay even if life happens and circumstances change. The key take-away is to stay in your lane and play it safer rather than being risky. Property is a long-term invest, so be sure to think long term in your financial calculations, too.
Additional Costs
The last aspect to consider for first-time buyers is that there are additional costs as a home owner, things that you may not have been aware of if you’ve been renting thus far. There are rates and taxes to be paid to the city you live in, as well as property management fees that go to the company who manages your block (this only applies to apartments). Moreover, a home or apartment needs constant upkeep to remedy wear and tear. If your fridge suddenly breaks down or your heater stops working, this is now your issue as the home owner.
While owning a home to call your own is an absolute dream situation and the majority of people aim for this, there are certain things to consider before calling an estate agent. Try to think ahead a little bit and see whether your prospective purchase is feasible. And, while you’re doing that, make sure to save as much as you possibly can, each dollar you save is a dollar that you don’t have to lend from the bank and thus pay interest on.
Recent Comments