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When is the right time to buy?

When to buy is arguably the most common question buyers ask. “Once buyers are serious about purchasing they scour the internet for properties, read articles about housing bubbles, seller’s markets and current trends – all in an effort to make their investment at the best possible time. When is the best time to buy? The short answer is whenever you can afford it,” says Bruce Swain, CEO of Leapfrog Property Group.
 
Everyone needs somewhere to live and, in general it does make sense to invest in property as opposed to renting (and paying off someone else’s bond). That being said buying a home is a significant financial investment and not one to be undertaken lightly. Swain explains that there are a couple of financial boxes to tick before purchasing a property.
 
1.       Getting a deposit together 


The days of 100% mortgages are long gone and most banks now require a reasonable deposit before granting a home loan. “The average deposit required at the moment hovers around 20% (which is R200 000 for a R1 million home loan), but the bigger the deposit, the better position a buyer is in to negotiate,” advises Swain. Sellers and estate agents alike are also more likely to consider an offer from a buyer with a good deposit as it increases their chances of getting a home loan.
 
2.       Factor in the additional fees

A deposit is not the only cost associated with buying a house. Swain indicates that buyers need to be aware of the fact that there are a number of other costs involved in the transfer of the property:

·         Bond registration: “The amount varies according to the home loan amount but on a bond of R 2 000 000.00 the fee is approximately R 16 560.00 excl. VAT,” explains Swain.

·         Deeds Office registry: “This fee is charged by the Deeds Office for the legal registration of the bond. Again the fee is based on the home loan amount and the registry for a loan between R1 and R2 million is around R900.

·         Transfer Duty:     

Value of the property (R)

Rate

0 – 900 000

0%

900 001 – 1 250 000

3% of the value above R900 000

1 250 001 – 1 750 000

R10 500 + 6% of the value above R 1 250 000

1 750 001 – 2 250 000

R40 500 + 8% of the value above R 1 750 000

2 250 001 – 10 000 000

R80 500 +11% of the value above R2 250 000

10 000 001 and above

R933 000 + 13% of the value above R10 000 000


·         Conveyancer fees: this fee is for the service rendered by the Transferring Attorney who registers the property in the buyer’s name. “Using our R2 million example; the conveyancing fee will be around R 19 250.00 Excl. VAT.
·         Life insurance: “These days mortgage lenders insist on life insurance for the home loan applicant so that the home loan will be covered in the event that the home owner should pass away”, says Swain, “This cost will depend on the size of the home loan and the insurance provide.”
 
3.       Maintenance costs after the purchase


“Buyers are often so focused on the purchase process that they overlook the finances involved in maintaining the property thereafter. It’s important to factor in the monthly municipal rates and taxes (these will vary from area to area) as well as home insurance,” advises Swain. Other costs to bear in mind include moving costs, renovations and new school uniforms for the kids (if moving into a new school district).  
 
4.       What is the market doing in the area?

Buyers are a lot more informed these days, which helps when deciding to buy in a specific area. “It’s imperative that buyers know whether an area is improving (a prime example would be Woodstock in Cape Town which is currently undergoing gentrification) before making an offer. It is still best to buy the worst house in a good neighbourhood, than the best one in a bad neighbourhood” says Swain. 
 
5.       Have realistic expectations


A good way for buyers to determine what they can afford is to get pre-approval for a home loan. Swain explains that it doesn’t cost anything, but will give buyers a realistic idea of their price bracket: “Once a buyer’s been pre-approved for a home loan they need to sit and work out what kind of deposit they need to save up for and what the post-purchasing costs will amount to. It’s entirely possible to get a home loan for a certain amount, but not being able to pay the monthly instalments and the property rates and taxes on top of it as well so doing the math before making an offer to purchase is critical.”
 
At the end of the day the question isn’t so much about whether the property market is booming or bursting, but whether the individual buyer can afford to purchase a home. “Once a buyer’s taken the above costs into account and put together enough money to cover both the initial costs, as well as being able to pay the monthly maintenance costs – and only then - are they ready to make an important financial investment in their future,” believes Swain.


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