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Things to Consider Before Buying a New Home

Financial Planning

While it’s easy to get caught up in the allure of real estate and all the possibilities a new home has to offer, keep in mind that your decision could carry significant long-term financial and lifestyle implications. Whether you’re in the market for a primary residence, looking for a weekend getaway, or building a dream home to live out your retirement, here are a few things to consider.

The Timing

  • Why now and will you still feel this way in a few years?
  • How long will you keep the property?
  • Given your time horizon, is it worth the transactional costs you will pay to acquire and furnish the property, and get settled into the community?
  • If this is a second home, how often will you be able to enjoy it and are you considering renting it out when not in use?
  • If you are buying real estate for investment purposes, are you comfortable with the leverage you’re taking on in connection with this purchase?
  • Will you be comfortable in an economic downturn or slow real estate market?

The Property

  • What do the surrounding communities offer that will enhance the quality of your life?
  • When you compare this house to your list of ideals, what would you be giving up and what would you get?
  • Can family and friends get there easily and will they visit enough to warrant dedicated space?
  • Will the property meet your family’s changing needs throughout your time horizon?
  • Are you considering keeping the property in the family or possibly gifting to your heirs?
  • If you plan to retire in the home, have you assessed the community services, e.g., healthcare facilities, public transportation, libraries, etc.?
  • Does property in the area steadily increase in value?

The Financial Impact

  • Will you finance the home with cash or a loan, and have you assessed the trade-offs associated with both alternatives?
  • Have you calculated the total annual cost of the new property, including furnishing, household expenses, maintaining and repair, loan costs, additional insurance, real estate taxes, etc.?
  • What are the investment trade-offs and opportunity costs?
  • Given historically low-interest rates, are you considering arbitrage between investment rates of return and mortgage rates?

You may answer all of these questions and still have concerns. Lenox Advisors can help. We have the background, experience and extensive network to guide you and your family past potential pitfalls while identifying unique opportunities. No matter what strategies or financial instruments we recommend, they will be part of a larger financial plan — one that you lead, based on your goals and aspirations.