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Buy a home now or wait a bit? 5 things to consider

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Nowadays, around three quarters of Belgian families live in their own homes. This is often a smart move. You are investing in something that belongs to you, and your home can increase in value. If you repay your loan on time, you will be more comfortable later in life. Anyone who is still renting when they are older will see much of their pension go to their landlord.

As long as you see a house as a place to live in for a long time (and not as an investment), it is usually a good idea to buy sooner rather than wait for years. However, there are a few things you need to consider.

1. Your financial situation

This is perhaps the most important factor when determining whether you are ready to buy. When you review your current financial situation, there are two questions you need to answer:

> What size of down payment can you make? Buying a home with little or no down payment is risky both for you and the bank you borrow from. Ideally, you should be able to put down at least 20% of the purchase price yourself and also pay the property registration fees and notary fees yourself. In practice, however, this is not always feasible. However, depending on your situation, the bank may agree to a smaller down payment as long as that down payment falls within the boundaries set by the National Bank of Belgium. As a rule, you will be offered better credit terms if your down payment is higher.

> Can I guarantee that I can make the repayments? Although this question is obvious, it is better to think and weigh up your answer for too long than to act in haste. If you opt for a fixed interest rate, your payments will not change over the term of the loan, and it will be easier to predict whether you can afford future payments. Do you want to do a simulation? Our online mortgage KEYHOME works with fixed interest rates.

If you opt for a variable rate of interest, you may be able to afford the payments now, but you may not be able to do so if they are adjusted upward in the future. This is why you should carefully check the terms and conditions of the offer and the maximum possible change when considering a variable interest rate. If you do not wish to do this or are unable to shoulder the risk, it may be better to pass on it.

Some ground rules

  • A fixed interest rate allows you to be sure, a variable rate less so.
  • The smaller your down payment, the higher the interest rate.
  • The longer the term, the higher the interest rate.
  • For variable interest rates: usually the more frequently the interest rate is reviewed, the lower the interest rate will be at the outset.
  • In the case of variable interest rates: the law stipulates that the original interest rate must never rise more than it can fall. This allows the interest rate to double at the maximum.

2. Your financial future

If you recently changed jobs or if you are considering doing so, or if you expect major changes in your income, it is usually not a good time to buy a house. In that case, it is better to wait until you have more solid ground under your feet.

Even though you may have all the figures lined up right now, it is always good to have a backup plan in case something goes wrong in the future, such as redundancy or a medical problem. Typically, this means you should create a financial cushion before buying a house. In addition, you shouldn't then use this cushion to buy or renovate your home.

Depending on your personal situation, it is always advisable to have a reserve of 3 to 6 months' net household income. This reserve may also be useful in the event of unexpected costs. After all, you no longer have a landlord who you can call when something breaks down.

3. Your long-term commitment

Triplets on the way? Do you change jobs frequently? Do you often feel like searching out new horizons? Does the love of your life live in Portugal?

Buying a home involves a high cost and commitment. In addition, you cannot recover part of the costs.

If you buy a home, it is a good idea to live there for at least 5 years to avoid the risk of having to sell at a loss. If you don't plan to stay in the same place for that long, this is probably not the time to buy.

4. The current property and loan market

Demand for real estate is still rising today. This is due to a combination of all kinds of factors: favourable lending terms, tax benefits, social developments (more Belgians and more smaller families), etc.

However, the rush to acquire residential property also has a dark side. The Belgian housing market is overvalued: by 13.5% on average in the first nine months of 2020, according to the National Bank of Belgium (NBB). An overvaluation is not unusual in itself, this has been the case for years. The 2020 figures alone show it to be almost twice as high as in 2019.

Would-be buyers currently face a second issue: how will the coronavirus crisis ultimately affect our economy and employment? This, in turn, will have an impact on the housing market and prices, especially if the clouds clear and governments stop injecting money at such a pace.

Anyone who wants to buy a home today is in a difficult position, where things could go either way. On the one hand, the benefits of owning your own home are clear and nobody wants to miss the boat; on the other, there is also a risk of buying in at the wrong time. It's impossible to accurately predict what interest rates or property prices will do, so these shouldn't be the decisive factors – but they do need to be taken into consideration.

As long as you see a house as a place to live for a long time, it is generally a good idea to buy. If you do buy at "a bad time", you can still give the market plenty of time to recover.

5. Your willingness to roll up your sleeves

Being a homeowner is different from being a tenant. You need to take care of all your own repairs and maintenance (or pay someone to do it) instead of relying on someone else to do them. You may have more work to do on your garden, as well as additional responsibilities that tenants don't have to worry about. Some people don't mind such jobs, while others don't want the hassle. Think about whether you are ready to take on the additional responsibilities of home ownership before making a decision.

This article does not contain any investment advice or recommendation, nor a financial analysis. Nothing in this article may be construed as information with a contractual value of any sort whatsoever. This article is intended for information only and does not constitute in any way a commercialization of financial products. Keytrade Bank cannot be held liable for any decision made based on the information contained in this article, nor for its use by third parties. Every investment entails risks such as a possible loss of capital. Before investing in financial instruments, please inform yourself properly and read carefully the document "Overview of the principal characteristics and risks of financial instruments" that you can find in the Document centre.

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