FINALLY, IT IS EASY TO OWN YOUR OWN HOME.

Much has been written lately about the current low interest rates and how it benefits those young people looking at taking the first step into the homeownership arena. There are, however, loads of people who always chose the rental option due to the seemingly complicated nature of purchasing property in South Africa. Let us look at only a few facts in an attempt to demystify the home buying process.

Buying a home means that you must have the money to buy, or have access to money. The latter is mostly the case. Three out of the four major banks will give 100% home loans on the purchase price of R3 million. That means that you need only the transfer duty and related costs, as well as the bond costs; these costs are dependent on the purchase price of the property. One can get an estimate from your estate agent or a conveyancer.

The financial institution will look at two things before granting the loan: 1 - The property: Is it habitable, insurable, and is the value of the property relative to properties in the surrounding area? 2 - The purchaser: Can the applicant afford to make monthly payments on the loan?

Now, this is where the current low interest rates come in making it so much easier to qualify! It will cost only R7070 per month per R1 Million loan (i.e. R2 Million will be R14140 pm) over 25 years. In order to qualify one must earn approximately 3 times the repayment amount, i.e. a gross combined income of R21 210 per month. The higher the interest rate, the more one must earn to qualify. So, the urgency right now is to get into a home of your own whilst it is so easy.

A word of caution, though. When the interest rates go up, your bond repayment will go up too, unless you request a fixed rate from your bank. You must be comfortable that you are able to increase your payments when this happens. There is nothing worse than being forced to give up your home due to your inability to make the necessary payments. With homeownership comes additional expenses like insurance, maintenance, rates & taxes, and levies, if applicable.  When you rent, the landlord has calculated most of these expenses into the rental amount, and you are in effect paying for these anyway. It is, therefore, a misnomer to think that it is cheaper to rent than to buy.

Keep in mind that property is a real asset that over time will increase in value. By paying rent you are paying off your landlord's bond instead of your own. Your goal when buying your first property must simply be to get a foot in the door, not to purchase your dream home. Buy a small starter home that will be easy to let, when you are ready to move on. Eventually, you will be getting a good income from rent. In short, buy now with a long-term vision in mind.

Banks will look at one's debt-to-income ratio to determine affordability. One must submit a monthly income and expenditure statement, and a credit check will be done. Adverse listings on the credit report will affect the decision to grant the loan or not; these include late payment of accounts, non-payment of accounts, arrears, and summonses. It is therefore especially important to know what your credit score is, and if any adverse listings appear on your credit report. When one knows, one has an opportunity to fix matters before applying for a home loan.

Owning a property is a great investment for your future and it offers multiple ways to accumulate wealth. Owning a property also allows for certain tax deductions, like interest payments on the bond, maintenance, municipal taxes, and more - these deductions can reduce one's taxable income; renters do not have the same privilege.

As the saying goes, strike while the iron is hot. The property market is vibrant, interest rates are at an all-time low, and the financial institutions are willing to lend money to those with good credit and the ability to repay loans; why not make use of these favourite conditions and buy a property now?

Also, read https://www.huizemark.com/news/get-ready-to-buy-your-first-home/