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A typical worker nowadays lives from paycheck to paycheck—eat here, grab some drinks there, shop for a new pair of shoes, etc.—with all the money earned slipping through their fingers. Of course, it is hard to allot a portion of one’s monthly salary in something that will not give them an instant satisfaction.
For instance, investing in an insurance policy does not give you the immediate gratification of, let’s say, a new smartphone or an overseas trip. However, looking at things from a long-term perspective, it is indeed wise to invest in things that would eventually bear fruit in the future and it is better to start saving up early.
Perhaps, the most common investment people save up for is the dream house. However, deciding to become a homeowner is a big step and it takes more than just willingness. Two other things are needed as well: emotional readiness and financial capability.
For younger workers, they may find it too early to commit to such major investment. But there should be no excuse from committing in one. There is not really a definite time to invest as long as you continually get your hard-earned sahod every month.
Here are some things you should know to perfectly manage your monthly earnings while you lay aside some for your dream home.
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1. Think long-term
The decision starts with knowing what you truly want and need. Do you want to live in a high-rise or do you prefer a house and lot? You can also ask yourself if you are really up for the challenges involved in buying a property. Maybe it would be more practical for you to rent a space?
Of course, buying a property would give you more edge if property values are to be considered. Unlike renting, paying the mortgage is like having a savings account. As you invest in your home, its value increases over time. This will be beneficial should you decide to sell your property in the future and keep the investment flowing.
One can also passive income from a property by renting it out to potential tenants, which is a strategic move to increase monthly earnings. Another option would be jumping into the sharing-economy bandwagon and offer your place to short-term renters via AirBnB and other house-sharing platforms.
However, the most important benefit in owning a property lies in your freedom and control over it. You have your say on home improvements, on creative enhancements and how you like the home to operate. You can rent out one bedroom for extra income or you can have the place all to yourself.
2. It’s about balancing the cost and the location
Once you have decided to push through with the plan to purchase a property, the next thing you should know is where to look for and buy from. While all property developments such as condos and subdivisions are ideally set up in certain locations, it is up to you to decide the place that fits well with your current commitments. The proximity to the places you commonly need to go such as your workplace, hospitals and government institutions should be considered.
It is also crucial to take into account your monthly salary. If you work in major business districts such as the Makati and your monthly income is below Php25,000, then snapping up a home nearby could be a long-shot.
Based on Lamudi’s calculations, if properties are bought using a 20-year term housing loan and an 11 percent interest rate, the best locations for those earning Php20,000 to Php25,000 are Bulacan, Cavite, and Rizal. Such earners can find pre-selling or resale townhouses and foreclosed homes in the said areas. Although these provinces are on the fringes of Metro Manila, they are still accessible from metropolis, thanks to the improving transport infrastructure going to and from the Philippine capital. On the other hand, if you earn as much as Php45,000 a month, then you can afford to grab at least a one-bedroom condo unit in Makati and Quezon City.
To put it simply, the higher the income, the more options you have. But compromising is an option. The key is determining the right balance and looking for the location that best fits for your budget.
3. Know what your pockets will be in for
Buying real estate is not like buying something from a store, which is a one-time payment thing. This is why it is important to buy a house while you still have a steady flow of income. Once you have placed your down-payment, you will now have to take care of monthly mortgage repayments, annual real property tax, and other maintenance fees.
You should also take note of other fees, which are normally overlooked at initially. These fees include documentary stamps tax, transfer tax, registration fee and notarial fees.
How do you know if your finances can handle the situation? Dan Barnabic of Market Watch said the right time to buy a house is when prices require no more than one-third of your annual income to cover mortgage payments, maintenance fees, and real estate taxes. Meanwhile, financial adviser and author David Bach told CNBC that as a rule of thumb, only 29 percent of the gross monthly income should be spent on housing expenses. If your debt book is clear, you can stretch it out to as much as 42 percent.
The secret to this is to not pressure yourself to invest and commit. Buying a house goes at your own pace, with you controlling how fast or how slow you can accomplish your duties. After all, no amount of planning can push you to do something unless you are really ready. But keep this in mind: if the early bird catches the worm, what more can investing early get you?
SEE ALSO:
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35 BEAUTIFUL 2016 HOUSE DESIGNS
50 IMAGES OF 15 TWO STOREY MODERN HOUSES WITH FLOOR PLANS AND ESTIMATED COST
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