Plan ahead for home ownership
Planning is key to successful homeownership and the first thing to plan is how to afford your first property. So says Dr Willie Marais, president of the Institute of Estate Agents(Ieasa), who notes that making the long-term commitment to buy a home can be especially daunting when you have doubts about how far you income will stretch.
"Consequently, first-time buyers should always try to work out a realistic budget and live with it for a while before putting pen to paper on an offer to purchase."
Marais advises the creation of a budget that includes your estimated monthly bond repayment, municipal service charges and rates and taxes as well as current basic expenses such as food, transport, healthcare and school fees, in addition to an amount for luxuries such as take-away meals and of course, a contribution to your "crisis kitty" for emergencies.
"Once you have established what your expenses should be, you should try living within this budget to see how you cope - and if you can in the meanwhile save some of what you have budgeted for a deposit."
Although it is relatively easy to obtain a 100% home loan, Marais says, first-time buyers need to realise that paying a deposit can really make the difference between managing comfortably and struggling to make ends meet every month.
"For example, a deposit of R50 000 or 10% on a R500 000 home will mean that the buyer's minimum bond instalment every month will be around R500 less.
And paying a deposit also creates a cushion against interest rates increases, which is the third element of affordability planning."
Banks generally will grant homeloans on which the monthly repayment is around 30 percent of the borrower's gross household income but, says Marais, homebuyers should never buy a home that will stretch them right to the limits of their financial capacity.
"You simply must allow room for interest rates - and monthly home loan repayments - to rise without creating a personal financial crisis.
"And don't think it can't happen to you. Each of the interest rate increases since July last year has only been 0,5 of a percent, but together they have pushed up the monthly repayment on a R500 000 bond by more than R800 - the sort of difference that may just be impossible to deal with if you're on a tight budget."
In short, says Marais, sacrifices may be required so that you can afford to buy and maintain a home. "However, these are more than worth it to become a proud homeowner."
Issued by the Institute of Estate Agents of SA
Article from: www.ieasa.co.za