Save hard if you want a home of your own

If you’re hankering after a home of your own and hoping to buy before prices start rising again, you better start saving seriously for a deposit.

So says Dr Piet Botha, chairman of the Nationlink estate agency group, who says it is ironic that at a time when the national savings ratio is at an all time low, the banks are now all only awarding home loans on condition that the homebuyer has a deposit of 10 percent or more.

“Consumers are obviously battling to save because the cost of living and interest rates are so high, and yet if they don’t save, home ownership will be out of reach again, just when property is beginning to look more affordable.”

However, he says, since it doesn’t seem like the global credit crunch will end any time soon, the only response open to those who want to get off the rental treadmill and buy their own home is to scrimp even harder and get enough cash together for a deposit.

“And the one good thing about the higher interest rates is that the money you put in your savings account now will earn more and mount up faster.”

Would-be homebuyers should start, Botha advises, by drawing up a budget that provides for them to spend less than they make and sticking to it rigorously. “In fact at this stage you should spend only what you actually need to survive and put everything else towards two goals – paying down debt and your savings.”

Paying down debt, he explains, is important because in terms of the National Credit Act, banks must also look at the disposable income you have available before granting a home loan – and there won’t be much of that if you have a heap of credit card, car loan and store accounts to pay every month.

“It is also important because it helps you build a good credit history, which is the third component the banks will assess when you apply for a loan, and because once you have paid off your accounts you can put the equivalent of the repayments you were making into your savings.”

Article by: