All the time, you see people saving for their deposit, and they might stay at home for longer to save up for their deposit and it’s becoming more and more difficult to get on the property ladder. Families, friends and clients have children who move out of the house, they get a bigger house and they put all their effort into buying this house. Getting it nice and making it lovely. But let me tell you this, your residential home is not an asset. It’s actually only an asset when it’s sold and then you or your beneficiaries receive the money from it.
Your residential home is not really an asset you can enjoy unless you’re going to start renting out rooms or you’ve got a barn or an outside space or another building that you could rent out. An asset is only something that basically covers its liabilities and its costs but whilst you’ve got mortgage, it is a massive liability. It’s NOT an asset if it’s NOT giving you an income.
In financial planning the first thing to consider is, will you have financial security when you finish work? Because one of the biggest outlays is your mortgage or your debts. Secondly, will you have enough income to then pay and have a lifestyle you like, pay the electric, or even put food on the table?
So if you’re looking to move house, make sure that you’re not just going for the next shiny object. If you have spare capital, don’t just think of what you could be reducing your mortgage by but also what could you be investing more into so that you can actually capitalize on your financial position. What could you do to increase your asset base, and that is not necessarily creating more debt with a bigger mortgage, and then spending all your time and effort to clear that mortgage down and then still have nothing to show for it.Â
I always believe in a balanced approach not to put all your eggs in one basket.
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