Buying a property abroad as a permanent residence is an exciting idea. But is it really necessary to own a home? In this article, we explore reasons for buying and what to look for in a home.
Why Do You Need a Home Abroad?
Owning a home is advantageous for your financial and fiscal future, especially if you're a first-time buyer. But the advantages of owning a home abroad don't stop there. Here are some reasons why you need to purchase a home:
When it comes to buying a home, many expats only see the many costs involved, such as the down payment, homeowner's insurance, levies, appraisal fees and so forth. However, in the long run, it is cheaper to own a house than to rent it.
Generally speaking, if you compare the monthly mortgage of a home with the costs of a rental property, the cost of ownership is much lower.
When you rent, you have to pay a considerable amount per month, whereas if you own the house, you only pay the mortgage. Also, your rental costs can fluctuate uncontrollably, and you are obliged to comply with them. This is not the case if you have a house as you only pay a fixed mortgage monthly fee.
Buyers who are well versed in real-estate taxation quickly realise that owning a home has solid tax advantages.
Arguably, the most significant tax advantage when you own a home is the ability to deduct the monthly interest paid from your tax return. During the first few years of a mortgage loan, the borrower's monthly payment represents almost all interest. That means that at the end of the year, there is a welcome deduction.
A common trend among expats who rent is that they are frequently on the move and generally don’t stay in the same place for more than five years.
Owning a house helps you to find stability, which is a great advantage. When you buy a home, you are making a long-term commitment and a relatively significant investment. It’s therefore unlikely that a move will take place every two or three years.
People who buy a house often seek the extra stability that comes with owning a property.
You have several options when it comes to investing. One option is to own a home.
While buying a home is a considerable expense, it also offers a much better return on investment than other big purchases, such as a car. For example, with a vehicle, depreciation starts as soon as you drive it out of the dealership.
Although property markets are different, in most cases properties appreciate, depending on local market conditions. And according to studies, the average rate of return from owning a home is between 8.6 and 10 percent per year.
What You Should Consider When Buying a Home
Now that you know why should purchase a home, here are some factors to consider when doing so:
The first thing to consider when you want to buy a house is the price, and whether you can afford it or whether you need to wait and save up.
If you're wondering how to budget for your home purchase, here's how to do it.
- Establish your starting point: A good start would be to ask yourself how much you have in savings or how much you are willing to put aside per month. You should also ask yourself how much you are willing to invest in a new home. After that, you should now compare the offers and see which one suits you best.
- Break down expenses: Make a careful analysis of your current financial situation. Examine your savings, discretionary spending, mandatory monthly expenses, debts and investment accounts. Having a clear picture of these elements will help you establish a realistic plan for buying your home.
If you can’t afford the house, you can still rely on a mortgage to purchase your dream home.
After creating the budget, you have to look for a good location. The location you choose should depend on your lifestyle and long-term goals.
In some cases, you may choose to live close to downtown if your business is located there, or close to your children’s school. However, if you are looking for quiet, you will want to stay in an area that is sheltered from noise, away from bustling areas.
Keep in mind that when you choose the right neighbourhood, the chances of staying there for a long time are high, which works to your advantage.
If you're buying for the first time and have no idea how to renovate, you may want to avoid a house that needs work done. The problem with this type of home is that costs can add up quickly. Plus, it could delay your move if the house needs structural work, causing you unnecessary stress. That’s why you should consider buying property that’s in good condition.
Here are the three main categories of property condition:
- Move-in ready: These are new or close-to-new houses. In some cases, these are already renovated houses. With this type of home, you don't have to spend extra on a renovation.
- Minor updates: These are often houses that need a slight touch-up like changing the paint or the taps. The expenses required are usually light and allow you to stay within your initial budget.
- Major renovation: The price of these houses is often low because of the number of repairs needed. One upside to a major renovation is the opportunity to personalise the home to your tastes. However, with this type of property, you risk being delayed in the move.
Choose the Right Property
There are several reasons why you should consider buying a home if you are an expat. Similarly, there are many things to consider before jumping into purchasing a property. One of them is the mortgage. That is why you need a property mortgage calculator to get a clear idea of how much it will cost you per month. That way, you can plan your expenses better.
