When it comes to buying a new house, aside from appeal and how it makes you feel, you also need to consider whether the home you want to buy will appreciate - or depreciate - in value in the future. The last thing you want is to be saddled with a mortgage that’s more than the actual value of your home.
Remember, your home isn’t just a house or apartment you will live in, it’s also an investment, perhaps the single biggest investment you will make in your life. So, it only makes sense to make a future-proof home purchase. Here are four steps you can follow to do that.
Location, Location, Location
When buying a home in a less-affluent part of town, you can expect generally lower home prices. The only catch is that there’s no way of knowing whether homes in the area will actually appreciate in value in the near future. If the area is up-and-coming, this could be a gamble that pay offs handsomely in the long run. But when it comes right down to it, you’re really better off just buying a small or mid-sized home in a slightly upscale neighborhood where you know home prices are likely to increase.
Be Ready to Invest in the Property
A home isn’t going to appreciate in value on its own. You need to be ready to invest in your property through regular maintenance and smart upgrades. Even if you think you won’t be selling your home in the future, it’s a good idea to prepare for that eventuality anyway. You never know if you’re going to move to another city or state, or simply move to a larger home.
Maintenance is pretty straightforward, but what kind of upgrades should you make? Conventional real estate wisdom tells us that it’s the kitchen that sells the house, so it’s a good idea to start there. Bathroom upgrades are also a good idea, saving future homebuyers from the hassle and cost of an often-expensive bathroom remodel.
Buy During Low Season
For the best appreciation potential, buy your home during the low season when prices are at their lowest. Competition with other buyers tends to be low during the winter, not to mention most wintertime sellers want to close a deal as quickly as possible.Another reason to buy in the offseason is that your listing agent will usually have more time to help you in your search for a home.
Weigh Your Mortgage Options
If you’re planning to live in your home for no more than 10 years and you are willing to make upgrades and remodels to help increase its value, you can opt for a balloon or interest-only mortgage, which will let you pay only the accrued interest of the loan. You can then sell your home by the end of the loan period, pay off your balance, and make a profit from the sale.
If you’re not sure how long you’re going to stay in your new home, a traditional mortgage with the shortest possible repayment plan is probably best for your needs. It will mean higher monthly mortgage payments, but your home equity will also grow faster. Your total mortgage amount also ends up being lower.
For more mortgage advice and insights, talk to mortgage advisor Chris Lamm today, and be on your own way to owning your dream home.