Figuring out whether to go ahead and buy a house or flat is hard – especially if it’s your first time. There are quite a few things to consider and bear in mind. After reading a list from Forbes that captures some of the essential “musts” home-buyers should consider, we adjusted the tips a little bit to get a local flavour:
1. Have you got enough money for a deposit?
Prior to the global economic meltdown, many banks approved home loans without requiring a deposit. Bad debt has led to a rethink of this approach, and the chance of getting a home loan approved without a deposit is slim. Some home loans require deposits of up to 20%, and the smaller the deposit requirement, the larger the balloon costs, with the deposit savings built into your monthly instalments. Moral of the story? Save up as much as you can before you buy.
2. Will you be able to afford all the added costs?
Apart from rates and taxes, you will be required to take out a life insurance policy to cover the value of your mortgage if you should die or become disabled*. Mandatory short-term insurance for the building might not be included in your bond, which could be an added expense. As for rates and taxes, the property is valued by the municipality and taxed accordingly. In some instances, the monthly cost could boil down to more you have been coughing up in rent. Monthly costs for sectional title properties, where levies cover some of these expenses, might be more affordable.
3. Will you be able to afford higher interest rates?
Interest rates were low during the economic downturn. As the economy recovers, the rates are now going up again, which means monthly repayments are higher. This could have a significant impact on the monthly repayments on your bond (if the interest rate isn’t fixed).
4. Do you have money for maintenance and repairs?
You shouldn’t just budget for your monthly mortgage repayments. Can you afford to keep the property in tact? Gardens, swimming pools, security systems – you’ll have to fund a host of other expenses that you may not have faced as a tenant or a hanger-on of your parents, and everything adds up.
5. How long are you going to be staying in your place?
Buying and selling costs money. Think transfer duties, inspection fees (e.g. to get an electricity clearance certificate) and – if you’re selling – you’ll have to pay estate agent commissions. If staying in the place you would like to buy is part of a short-term plan, it might not be worth the expense as the costs might exceed what you’re paying in rent. However, if you’re going to stay there for a couple of years, these extra expenses might be worth the while.
Read the full Forbes article here.
* In case you were wondering, BrightRock does offer life insurance cover for your homeloan and other debts that is specially designed to match your individual needs. To find out more about this, speak to your financial adviser or read about it here.
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