Buying a house on your own: a guide
The past years, with huge demand for housing, haven’t been kind to single first-time buyers. It’s still a tough market for first-time buyers, but there’s a silver lining: the trend of paying above the asking price appears to have passed for the time being. What are your options now? ABN AMRO adviser Ulric Breusers tells all, supported by tips from mortgage adviser Hilay Eker.
What are single first-time buyers’ chances on the current housing market?
Ulric explains, “There have been huge changes over the past six months. House prices are down, which is a good thing for first-time buyers. At the same time, rising mortgage rates mean first-time buyers can borrow less. It’s a complex market for them, and their position has remained essentially the same over the years. We know we’re painting a bleak picture, but there are still opportunities out there. It’s worth saying that first-time buyers with savings are in the best position.”
What costs do first-time buyers need to cover themselves? And how much should they borrow?
“This all depends on your personal situation. However, anyone buying a home will need to pay purchasing costs out of their own pocket. Purchasing costs include property transfer tax, the notary’s fees for the mortgage deed and mortgage closing costs. These costs are on average 3% of the purchase price.
I’d advise first-time buyers not to max out their borrowing limit. Instead, they could invest extra cash to lower their monthly repayments. My general rule is to borrow 15 to 20% under your borrowing limit. That keeps the loan manageable and means you can easily afford the monthly repayments. That rule of ‘live and buy within your means’ applies to financial planning in a broader sense, too.”
How much should your monthly repayments be?
“My most common advice to clients is that their monthly repayments should be no more than 30% of their net monthly income. Another way to look at it is that you should be able to keep saving about 15% of your net monthly income. You’re better off buying a small home, not taking on a huge mortgage debt and gradually upsizing from there.”
Are first-time buyers better off staying in rented accommodation?
“Renting nowadays is usually very expensive, and the money you pay towards your rent is gone forever. While the housing market is prone to fluctuations, house prices usually increase in the long term. If you can afford your monthly repayments, owning your home is a great experience. That’s what makes it worth it. A home is a place to call your own.”
When is it smarter to rent?
“The main argument is flexibility. Renting comes with no strings attached. For instance, if you know you’ll probably be working abroad in the next year or so, you might not want to buy right now. On the other hand, you’ll continue to pay rent each month. Another option is to buy a home regardless and rent it out while you’re abroad. If you choose to do that, your mortgage will be considered a ‘buy-to-let mortgage’. You’ll pay additional charges and may owe additional tax on income from savings and investment (box 3). It all comes down to your life and career plans.”
What about older first-time buyers? Have they ‘missed the boat’?
“Whenever and at whatever age you get on the housing ladder, you’ll likely benefit from house price increases in the long term. As long as there’s demand, house prices will continue to rise. You’re buying a home to enjoy quality of life. If that decision increases your wealth in the long run and lets you upsize, so much the better.”
Are single buyers running a risk in the current housing market?
“It all comes down to affordability. If you can afford your monthly repayments, there’s little cause for concern. Just remember to buy within your means, enjoy your home and build up a financial buffer for home renovations or repairs.”
What does the future hold for single first-time buyers?
“At this moment in time, it’s impossible to say whether the market has improved for first-time buyers. If the market’s in decline, it can pay to be patient. More and more houses are being put up for sale, so your choices will gradually open up. House prices are predicted to continue falling over the next two years (ABN AMRO Housing Market Monitor, January 2023), and mortgage rates appear to have stabilised for now. The current job market squeeze could work in your advantage, too. It puts you in a better position to negotiate a pay increase. Think of it like this: if wages go up, house prices decline a bit more and mortgage rates don’t go up, houses will become more affordable. That increases first-time buyers’ chances on the market.”
Want to talk about your financial future?
If you want to know whether you can buy your first home or achieve other financial goals, explore your ideas with an adviser in a Financial Future consultation.
