Budgeting for a home purchase

When you’re thinking about buying a home, there is a really important point you need to remember. Your is not an asset, it’s a lifestyle expense.

The main reason that many people consider a house an investment asset is because it goes up in value. You could buy a property for £750,000 and then a few years later it could be worth £1m. Amazing! You’ve made £250k, just like that.

But have you really?

Say you decide you want to sell the house and bank the £250,000. That’s great, but where are you going to live now? You could find another place to buy, but if your house has increased in value by that much, so have all the other houses around you. You’ll also have to pay agents fees and stamp duty, not to mention moving costs and all the hassle of actually making the move.

Unless you want to move to a worse area or a smaller property, that increase in net worth won’t change your lifestyle. Outside of being able to borrow more against the property (which you have to pay back anyway), you can’t unlock the value to make tangible improvements to your life.

It doesn’t end there. Not only does your home not provide you with usable wealth, it’s also a big drain on your pocket. You need to pay council tax, insurance, maintenance and repairs when the boiler inevitably packs. And don’t forget refurbishments every now and then as the bathroom starts to look like something out of the 1980s.

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