The straight answer is: It depends.
"How much to spend is purely down to the individual or married couple [which again contain many factors to consider]," said Rupert Connor, senior consultant, at Acuma Wealth Management. "Many are prepared to put in their life savings towards their home, not wanting high mortgage payments throughout their life and leaving them with more disposable income."
The key to any investment is whether it is affordable. As experience the world over has shown, many have overstretched themselves on property purchases. "Thirty per cent outgoing towards a home is probably about right as a percentage of the monthly income," said Sarah Lord, wealth planning director at Killik and Co. In deciding to invest in a property, one should have a clear budget identified both for how much can be spent on the property at the outset and how much it will cost on an ongoing basis. Acquisition costs include the moving costs (if buying as a home), legal and registration fees.
Then it is also important to consider the ongoing costs. Even if the intention is to rent the property out, there are likely to be periods where there is no tenancy. Ongoing costs include, maintenance charges and mortgage payments and utility bills. For investment purposes it really does depend on one's overall wealth, said Lord. "It also depends on the individual's other assets and committed regular expenditure."
If one is buying a property as an investment, the annual rental yield has to be considered. In the current economic climate, Lord says, a net yield of four to five per cent per annum would be reasonable.
As a general rule, whether it is for buying a home or for investment, Connor advocates putting down a 30 per cent deposit. "The higher the deposit you can put down the lower your monthly mortgage payment will be," he said. "Budgeting is important here as one may already be paying into pension and savings vehicles."
