Considering buying your first property? If so, make sure you have a clear idea of what you can comfortably afford on your home repayment each month, before taking the initial steps towards ownership.
While it seems like the current interest rate hiking cycle is at an end, it does not mean that you won’t have to deal with rate hikes in the future. For this reason, an allowance has to be made to buffer any future rate increases of at least 1% or R100 for every R100 000 that you borrow from the bank. If you are extended to your financial limit, it will put you in a vulnerable position, especially if there is no contingency plan in place.
You can use an online affordability calculator or for a more in-depth accurate measure consult with a bond originator who will be able to assist in determining what amount you can afford. Because banks place a heavy reliance on creditworthiness, an originator can also pre-empt corrective measures for you to take before submitting a live loan application to the banks, which will ensure that you have the best possible chance of obtaining the finance.
Before submitting a bond application, focus on reducing or entirely doing away debt and store credit accounts, reconsider insurance policies with little or no value and ensure that your credit record is favourable. Ideally, there should be no late payments reflected on any and you should have some cash in the bank at the end of each month. Financial institutions will check credit records as far back as six , so ensure that your record is clean for at least this length of time – longer.
Once the issue of affordability is out the way, and you are ready to move onto the next phase and look for a property, carefully consider and prioritise location. Location directly impacts the home’s potential appreciation in value, so look at the property’s proximity to amenities such as shopping malls, medical facilities, good schools and access to major transport routes. The orientation of the property should also be considered, with a north-facing property the better option. Orientation has an impact on certain elements such as the swimming pool, as it is better for a pool located on the western side of the property. Other aspects to look at are whether there is room for improvement, extensions or renovations.
Additional elements to look out for are pre-paid electricity meters which are good to have, as well as any solar installations which will reduce the energy costs associated with running a home.
Before making a final decision or signing any offer to purchase, have the property thoroughly inspected to ensure there are no major defects. Aspects to pay close attention to include the roof, load-bearing walls for structural cracks, sagging floors or ceilings and damp walls. Once the overall condition of the home has you will be able to determine whether the required repairs are manageable and within your budget. If too many things need to be done to make the house liveable, it’s time to walk away from the deal.
When you find the right home, and sign all the necessary paperwork, there will be some additional costs you will need to consider during the transfer process such as the bond costs and the transfer fees. It depends on the purchase price and type of property, but normally the transfer duty is the largest portion of the costs involved in the transaction. These costs will need to be paid fairly soon into the transfer process, so you will need to have it beforehand. Other costs include the attorneys’ fees, which are negotiable in some instances. The seller appoints the transfer attorney, while the bank appoints the bond attorney. When transitioning from tenant to homeowner, you will have the additional monthly cost of rates, water and electricity. Request that a reading of the water and electricity meters is taken on occupation. Also, take into account services costs, insurance, maintenance and furniture removals to name a few other expenses.
Take your time and only buy a property when you are truly ready. Buying a property is a long term investment with many advantages, but only if done in the right way.