Five Questions You MUST Ask Yourself Before Buying a House

Five Questions You MUST Ask Yourself Before Buying a House

Five Questions You MUST Ask Yourself Before Buying a House

Is your house an asset?

No, it’s a debt.

Hey, it’s Fumin, the money-saver from Sapporo.

Many of you probably dream of owning your own home. Having bought a house in my late 20s, I can tell you for sure: for us regular people, a detached house is a luxury.

This article is a must-read for anyone currently searching for property, dreaming of buying a house someday, or who has simply heard the words “my home.” Buying a house is one of the biggest decisions of your life, and the five questions I’m about to share are essential. Check to see if you can answer “yes” to all of them.

If, after reading this article, you can still say, “I want a house!” then buying a house will likely be the best purchase you’ll ever make.

1. Do you understand that a home loan is a debt?

Buying a house is often called the biggest purchase of your life, and most people take out a home loan to do it. From a purely financial perspective, buying a house is a complete luxury.

Have you ever heard someone say, “The rent you’re paying now is the same amount you’d pay for a mortgage, and you’d own a house in the end, so a house is an asset, right?”

That’s just a sales pitch from a home builder. It’s said that a brand-new house loses about half its value after just one year. Given this rapid depreciation, will your house still be worth anything by the time you’ve finished paying off your 35-year loan?

Unless you’ve bought a huge plot of land in an extremely prime location, it will likely be worth very little. Put yourself in someone else’s shoes: how much would you pay for a house that a stranger has lived in for 35 years? Probably not much.

In short, taking out a home loan means taking on tens of millions of yen in debt to buy the luxurious experience of living in a detached house. Make sure you fully understand this.

2. Have you considered the costs beyond your loan payments?

When you own a house, you have to pay property tax and city planning tax. These are local taxes levied on anyone who owns land or a house as of January 1st each year.

Property tax is calculated as: Property Value (tax base) x Tax Rate (standard rate: 1.4%).

While a building’s value decreases with age, you can expect to pay around 100,000 to 150,000 yen per year for a new house and about 50,000 to 100,000 yen for an older one. Let’s assume you’ll pay 100,000 yen a year—that’s about 8,300 yen a month in extra fixed costs.

Remember, your monthly housing expenses will be the loan payment plus these taxes. This is a topic that home builders conveniently leave out of their sales pitches.

3. Are you prepared for your utility bills to skyrocket?

This was the biggest shock for me after I bought my house. My utility bills in a rental apartment were about 10,000 to 15,000 yen a month, but in a house, they average over 25,000 yen.

The reason is simple: the size and number of rooms. Larger rooms mean bigger appliances like humidifiers and air conditioners, which use more electricity.

For us Hokkaido residents, heating costs are the biggest blow. My house uses an oil-powered panel heater, and in the winter, turning it on adds about 35,000 yen a month to my bill. (And that’s with the thermostat set to around 20 degrees Celsius—I’m still trying to save!)

Since panel heaters take a while to warm up a room, the boiler is basically on all the time. I’ve tried using air conditioners and circulators, but it’s still hard to save on heating.

Be prepared for your utility costs to more than double compared to living in a rental apartment.

4. Are you okay with living in a less convenient location? (You might need a car.)

This is especially true for Sapporo residents. Many people living in rental apartments are near a subway station, which is convenient for commuting since many companies are concentrated in the Odori area.

When you buy a house, there’s a good chance your nearest station will be a JR station. People like me couldn’t afford a house in a prime, subway-accessible location. I was lucky to find a great spot within a 10-minute walk of a JR station, but it’s still far less convenient than being near the subway.

Things like the post office and the bank are now a bit farther away. I was also surprised by how difficult it became to get rid of cardboard boxes. Did you know that Seicomart convenience stores will take one or more cardboard boxes from you for free? When I was renting, there was a Seicomart just two minutes away, so I’d often drop off boxes there. Now, there isn’t one nearby, so I have to drive to the local community center to recycle them.

If you live in a JR-accessible area, you’ll often find yourself thinking, “I wish I had a car.” I ended up buying one within a year of moving into my house, and as a result, my fixed costs are higher than when I lived in a rental apartment.

5. Do you understand that you are the sole manager of your property?

I’m talking about things like shoveling snow, gardening, and home maintenance.

In a rental apartment, you have a landlord or a building manager. In a detached house, you don’t. The person who manages the house and the land is you.

If an air conditioner or kitchen appliance breaks in a rental, you just call the manager to get it fixed. In your own home, you have to solve the problem yourself. You have to investigate the cause, find and buy a new appliance, and arrange for its installation.

For those of us in Hokkaido, snow removal is a major chore. In an apartment, you don’t have to shovel to get to your front door. In a house, you are the only one who clears the snow around your home. You’ll also have to buy your own snow shovel, which can be surprisingly expensive.

If you have a garden, you’ll need to prune trees and get rid of dead leaves. You’ll have to do many things on your own that someone else used to do for you in a rental. It can be fun, but remember that moving in is just the beginning.

Summary

Let me ask you again.

Do you understand that a home loan is a debt?
- There will likely be little value left after you’ve paid it off.
Have you considered the other housing costs besides the loan?
- You’ll pay around 100,000 yen in property tax every year.
Are you prepared for your utility bills to go way up?
- They could easily double compared to a rental apartment.
Are you okay with a less convenient location?
- If your nearest station is JR, you might need a car.
Do you understand that you are the property’s manager?
- You will have to handle any problems that arise yourself.

How did you do? Were you able to confidently say “yes” to every question? I hope this has helped you understand that the pitch about “owning a home for the same cost as rent” is just a sales tactic that compares a very small portion of the total costs.

If you couldn’t answer “yes” to these questions, take some time to think about the costs of owning a home and plan accordingly.

However, I considered all of these things and still decided, “I want a house!” I believe it was an excellent purchase. I hope that when you buy a house, it will be the best purchase for you, too.

I hope this article was helpful as you consider buying a home. Thanks for reading! See you later!