Homeownership - are you ready?

Homeownership is a milestone that most consumers aspire to achieve. It is a step towards growing personal wealth and owning an asset that will appreciate in value over time, provided of course that the correct principles are applied during the purchasing process, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who notes that owning a home can influence the owner’s financial well-being for the rest of their lives.

“There are several benefits to owning a property; however it is imperative that before buyers decide to take this step, that they are 100% ready and prepared for the responsibilities that come with homeownership. Owning a property requires desire, stamina and a level of financial commitment, so it is important that buyers carefully consider whether or not they are ready to take that step before they commit themselves,” says Goslett.

He notes that finding the right home and traversing through the sometimes complex process of the property purchasing process are only some of the aspects that potential buyers will need to deal with. “Searching for properties online or visiting show houses, doesn’t necessarily mean that a buyer is ready to commit to homeownership. Several factors need to be considered carefully before the buyer is certain that now is the right time for them to enter the market. For example, a buyer needs to know that they are willing to take on the responsibility of maintaining a property or paying for something if it needs to be repaired. As a homeowner, the onus is no longer on a third party,” says Goslett.

He provides potential home buyers with a few pointers to mull over before they sign an offer to purchase:

Living arrangement considerations:

When purchasing a property, most buyers will be required to pay a deposit, as well as the bond costs and attorney fees, not to mention other costs such as insurance and the general upkeep of the home. “Once all these aspects have been considered, it doesn’t make financial sense to purchase a home if the plan is only to stay there for a short term. Ideally a buyer should be planning to either stay in or hold onto their property for a period of at least seven years, but preferably longer. This will give the homeowner time to pay a large portion on the bond and hopefully for the home’s value to appreciate enough for the owner to see a return on their investment when they sell.

Purchasing a property should be viewed as a long term commitment and, as such, Goslett says that it is important that the buyer has considered their future plans and where they see themselves over the next five to ten years. This could depend on the buyer’s work situation or their family circumstances. “If the buyer is ready to settle in one place for a reasonably long period, then they might just be ready to buy,” he says.

Financial considerations:

The large majority of the population will be loan-dependant when buying a home. What this means is that their home buying ability will be subject to bond approval with a bank. “A buyer’s bond approval success will be based on their level of affordability, which is affected by their debt to income ratio. It is best for a potential buyer to pay down their debt as much as possible before applying for finance,” advises Goslett. “They should focus on creating as big a gap as possible between the money they earn and the money that is paid out to expenses and debt. It is important that they don’t make any large purchases during this time, such as buying a new car, for example.”

He notes that pre-approval through a bond originator is an excellent way for buyers to determine how financially ready they are to own a home or what they may need to do to get there.

Saving considerations:

Saving is a vital part of homeownership preparation. “Apart from the fact that most buyers require a deposit, there are other costs that they will need to carry during the buying process such as the attorney fees, bond registration costs and moving expenses. It is also a good idea to have an emergency fund saved up for any unexpected problems or repairs that may occur. Owning a home means that there is no longer a landlord that can be called to sort out the issue – the problem is for the owner to fix,” says Goslett. “There is a fair amount of maintenance that goes along with owning a property so it’s good to make a financial plan and have a nest-egg to dip into when needs be.”

Timing considerations:

Due to the impact that buying a home will have on a consumer’s long term financial wellbeing, it is vital that they don’t rush into a decision. However, it is also equally important not to let an opportunity pass just because they are not fully prepared to take advantage of it.

According to Goslett, timing is a crucial factor when it comes to homeownership readiness. Ideally a buyer needs to be ready to buy, but should also be able to wait if required. “Buyers need to give themselves enough time to research and find the right property, but don’t want to be in a situation where they have started too early and still have six months left on their lease agreement.”

Expectation considerations:

A progressive step towards homeowner readiness is realising that owning a property is not always going to be smooth sailing. The reality of homeownership is that it takes time, effort and a financial commitment.  “However,” says Goslett, “although there are some challenges that homeowners will face along the way, the end result is an appreciating asset and a home that they can call their own,” he concludes.

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