How to build a financial platform

Renting is a good option when you’re young or have yet to decide where and how you want to live. But if you are ready to settle down, buying your own home is a very good plan.

Investing in homeownership represents a long-term commitment to creating financial stability for yourself and your family. There are also many other benefits to owning your own home.

Advantages

One significant advantage is that homeownership is a passive way of creating equity – or a financial stake. Whether you rent or buy, you still need to spend money on a place to live. That’s money you have no choice about spending, so it makes sense to get some real value for it.

Another advantage is that you will be paying for your investment with money that you already know you can afford because you are currently spending it on rent. If you invest in shares, for example, you will have to find additional funds over and above your usual monthly expenses.

A third advantage is that you can borrow the money to fund your investment. In effect, the bank is carrying part of the risk while you are creating your personal wealth.

Long term

Buying a property is a long-term investment. If you sell within seven to ten years of buying, in most cases, the price of the property will not have significantly increased compared to what you still owe on the mortgage.

In addition, the costs involved in selling and buying another property are likely to nullify any profit you may make. This will have an impact on your ability to afford your next home.

There have been times when property prices escalate rapidly, and many owners have made substantial profits by selling. However, keep in mind that the price of the next property you buy will probably also have increased.

Credit score

Buying a property gives you access to other finance avenues and further wealth-building opportunities.

• Owning a home and consistently paying off your mortgage will significantly boost your credit rating. This means that banks will be much more willing to grant you loans for other purposes – including a second or third property. This could generate additional income and increase your asset base.
• If you decide to sell, holding on to your property for ten or more years assures you of significant returns on your original investment. This will enable you to put down a substantial deposit on your next home.
• If you decide not to sell, the equity you have built up can act as collateral for other investments, including additional income-producing properties.

When you invest in your own home, you will be investing in your self-worth as well as creating a sound financial platform that will substantially benefit you and your family.

Writer : Sarah-Jane Meyer