Saving for your dream home in a tough financial environment

The recent repo rate hike of 25 basis-points, which has brought the prime lending rate up to 10.5% means that many South Africans who are saving toward their dream home may be under financial pressure. 

But Eleanor van der Merwe, regional sales manager at ooba, South Africa’s largest bond originator, says that although saving in the current environment is tough, it is not impossible. Below are her essential tips to budgeting for a new house now. 

Top tip one: Use an affordability calculator

An affordability calculator helps determine the size of the home loan you’re likely to obtain, and guides you towards the right property price bracket. It also calculates bond and transfer costs, bond repayments and deposit saving amounts, which all help to assist you gauge how much you need to save, before you the begin process of applying for a bond.

Top tip two: Set and work towards a deadline

Visualise how soon you want to live in your dream home and what you need to get there. Set a target date to keep you motivated and committed to saving. Creating a deadline forces you to think each step through and any challenges you might experience along the way. Each step, such as applying for a home loan, will require a certain amount of time, which will better inform you on how long it will take you to achieve your goal.

Top tip three: Free up disposable income

As a general rule of thumb banks require a third of your income to be disposable in order to approve a home loan. Budgeting can help you free up disposable income. One way to do this is to ensure that your monthly expenses and debt repayments are paid on time every month.

Van der Merwe says that we are currently in a rising interest rate cycle, meaning that there may be more rate hikes on the horizon. This will continue to add pressure to your financial health each month, but it is imperative to not fall behind on your debt repayments, as this would negatively impact your credit score. The sooner you are able to pay off your debts, the better your financial position, especially if you are looking to climb the property ladder.

Top tip four: Skip that expensive holiday

Instead of planning a holiday to an expensive destination, or making use of luxuries while travelling, look at where you are able to cut down costs, which would allow you to put money away towards a deposit for your dream home. However, do allow for a few entertainment treats per month to keep yourself motivated, but be cautious to not overspend. 

Top tip five: Get prequalified

A prequalification service is a preliminary assessment of your ability to qualify for a home loan, which enables you to search for a property within your range of affordability, whilst giving you the confidence of knowing that you are credit-worthy. The services of a reputable bond originator can help you find out how much you can afford. This puts you at an advantage, as you have the confidence of knowing that you have a far greater chance of being approved by the bank when applying for a home loan.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
    • 19 Feb 2018
      The PayProp Rental Index Annual Review of 2017 shows that the rental market suffered from much volatility during the year. It kicked off with rental growth spiking in January with weighted year-on-year growth (YoY) growth peaking at 8.3% before dropping to 6.34% in July, dipping down to less than 5% in November and then experiencing a slight uptick at 5.75% in December.
    • 19 Feb 2018
      While most homes in cluster complexes, estates and other gated communities come with at least one garage or carport, residents would often like additional permanent parking or storage areas for things like trailers, bikes, boats and caravans.
    • 16 Feb 2018
      Whether you own a property in a sectional title complex or are looking to invest in one, the financial standing of the body corporate is the single most important thing that can affect your investment or your buying decision.
    • 15 Feb 2018
      One positive consequence of the financial crash in 2008 was the rise in consumerism, especially in the property market, where buyers have steadily become more knowledgeable and more value conscious.
    • 15 Feb 2018
      While most homeowners will take the agent’s commission into consideration when they are trying to determine what the will get out from the sale of their property, many often forget to factor in the other costs involved in a home sale, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 14 Feb 2018
      The forecast for the national rental market in 2018 remains a mixed bag of good news and bad news. Although rentals are expected to rise slowly as the challenges of home affordability and tighter lending criteria tighten their grip, it’s a double-edged sword as the market also will come under increasing pressure from factors like declining disposable income levels.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us