What to Consider When Buying Your First Luxury Home
For those in the Austin market looking to get their first home on the luxury market, or move up to a higher price point, there are a lot of considerations to take into account that are different than buying a first time home.
Buying a home a luxury home requires you to take your time, do your due diligence, and cover all the necessary bases. You want to ensure the home you pick is not only going to meet your expectations, but a smart investment for your money.
So, what are some things to consider when buying your first luxury home?
How Much of a Home Can You Afford?
One of the biggest mistakes luxury homebuyers make is purchasing something beyond their means. Really take a hard look at your finances to figure out:
- The monthly income of the household. Base this information on actual data taken from bank statements, financial advisors, and/or pay stubs. If you are self-employed or have an irregular income, calculate an average from the last 12 months.
- Your monthly expenses minus your current mortgage.
- The interest rate for your area and current credit rating.
- Your cash down payment. The down payment influences not only the amount you borrow, but your monthly mortgage payments and interest rate, as well. Anything lower than 20 percent means you must pay for private mortgage insurance and that factors into the monthly payments, as well.
For the average luxury home buyer, the monthly payment should not exceed 26 to 28 percent of your monthly gross income, but that’s just a general rule. People’s financial situations are all across the board so you may not need to follow that rule to ensure that the home is within your budget.
Also keep in mind that owning a luxury home means higher maintenance costs, so be sure to make those considerations when deciding a price point..
Determine the Home’s Investment Potential
Buying a luxury home means the stakes are even higher, so you want to make sure the property will be a sound investment for your money. You can start by assessing if the home you are looking at is already at luxury status:
- Is the value of the home high for the area? A million dollar home in some affluent areas is not necessarily the cap of your home’s equity.
- Does the home’s location have any impact on the price projection? Sometimes properties in prime areas (i.e. waterfront, downtown) or in developing neighborhoods stand to gain more value.
- How is the construction and particular features of the home? Does it have standard construction? Unique design and construction aspects can impact a home’s value.
- How about those amenities? Amenities make or break a luxury home. Does it have a private theater room? Swimming pool? Boat dock?
You also want to think about how you can increase the value after you purchase by adding amenities, additional construction, and remodels so when you sell the property, you can get a return on your investment.
For most luxury home buyer in Austin, they want their home to be a sound investment so that when they’re ready to sell, thay have a little bit of equity.
How Long Do You Plan on Staying There?
At the luxury level – especially for those who are high-level professionals – owning a luxury property can be unpredictable. If you travel often for a corporate job, you might only spend a couple years in a specific location and then be required to move. For older professionals or retirees, they may plan on owning the home longer.
Your chances for developing equity on your luxury home are much better the longer you stay in there.
It’s your first luxury home so make it a good one by taking your time and finding the dream property that fits both your lifestyle and budget. It may take a little longer but it’s time well spent.
For a head start on your luxury home search, check out our listings below, or get in touch with The Clausen Group today!