January 7, 2019
The fundamental desire to own property is a peculiarly British trait when compared to many of our continental neighbours. We have an inbuilt need to own and inhabit our own castle - upon which we can pull up the drawbridge and do as we please inside.
Our situation is similar to the United States, where Ramit Sethi the New York Times best selling author, describes the desire for property ownership as “cultural programming” and a falsehood of the American Dream.
To many young people in the UK despite the current cost of property, the concept of getting on the property ladder (and into huge mortgage debt) remains a case of when not if. More than ever, the tricky bit is, of course, how?
As well as the emotional pull of a place of our own, property is widely regarded as a no-brainer investment. The term “ladder” suggests that once the first foot is on it, the investment will grow and ultimately deliver a major return leading to ever more desirable and expensive properties. If only that were always the case.
The media feeds the fire with it’s obsession for reporting on astronomical house prices that make epic profits for those lucky enough to be in on the game – thus equally increasing the desire and frustration for those outside to get into it. Meanwhile, convention dictates that property ownership goes hand-hand with long-term relationships and raising families.
But the question that is rarely asked by financial advisers, journalists and parents giving advice to their grown up children is “why?”. Why do you want to own a property? Why is it so important?
At THE LIFEHOUSE.CO we do ask that question and the answers initially are usually standard: To provide, to invest, to not pay rent.
But we don’t give up there. We keep asking Why? Why? Why?
The first answer given is rarely the true, underlying reason. It’s often a stock answer that lacks any intrinsic motivation behind it – but buying property is for most the biggest financial decision of their lives and really requires greater consideration.
To embark on the journey of saving for a deposit and obtaining a mortgage is a major commitment that takes dedication. To then own the property, maintain it when the roof leaks or boiler breaks and service the mortgage is a greater commitment still.
Ramit Sethi calculates that the cost of running and insuring a property puts 40%-50% on top of the cost of a mortgage. So to compare a £1000 monthly rental payment (where all maintenance costs should be picked up by the landlord) with a £1000 monthly mortgage payment, doesn’t come close to comparing eggs and eggs.
So, getting into property ownership takes serious consideration. Here are five, not very good reasons:
- Make my parents happy
- As a rock solid investment
- To impress someone
- Because I pay the same in rent as I will a mortgage
- Because of government incentives
There may be an element of truth in any of the above scenarios, but they are on shaky ground as true motivators.
The reason the “why” question is so important, is that in order to take on a major commitment, we need to be appropriately motivated to stay the course. Yet too often we see property purchasing as a transaction where the only consideration is how much the monthly mortgage repayments will be?
To uncover the underlying reasons (that will make the hard yards easier to navigate) requires deep-delving into motivation and priorities. It may be that the real driver is to atone or compensate for an event in the past. Or it may be a vision of the future. Or it may turn out, that on reflection, it’s not the right time to get into property. Maybe there are more important things that should be ticked off first – like fulfilling a desire to travel. Maybe just getting financial affairs in order is more important in the short term.
Financial Advisers sell mortgages. They fit your numbers to the criteria the lender needs and if you qualify, off you go. But before you go anywhere near such a project, there are three questions you need to ask that they won’t: Why? Why? Why?