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Are you ready for homeownership?

Owning a home is a milestone that most South Africans aspire to. Becoming a homeowner is a step towards growing personal wealth and owning an asset that appreciates in value over time, provided of course that the correct principles are applied during the buying stage of the process, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

“Buying a property has numerous benefits, however, it is vital that before you decide to enter the market, you are fully ready and prepared to take on the responsibilities that accompany being a homeowner. Owning a home requires desire, stamina, and financial commitment, so it is important to consider whether or not you are ready to take that step before you commit,” says Goslett.

He notes that finding the ideal home and navigating through the often complex process of buying a property are only some of the aspects that potential buyers will need to deal with. “Starting the processing of looking for homes online and visiting show houses does not necessarily mean you are ready to be a homeowner. In fact, statistics reveal that on average, from the time a buyer starts looking at property online, to the time they buy takes around 26 months. The reason for this is that there are many elements that need to be taken into account before you decide that now is the right time for you to enter the market. For instance, are you 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.

Here are a few pointers to mull over before signing an offer to purchase:

Consider your living arrangements:


When buying a home, most buyers are required to pay a deposit, as well as the bond costs and attorney fees. There is also the cost of insurance and the general upkeep of the home. “Considering all the costs involved in purchasing a home, it won’t make financial sense to commit to buying a home if the plan is only to stay there for a short term. Ideally, you should be planning to either stay in or hold onto your home for at least seven years, but preferably longer,” says Goslett. “This will give you time to pay a large portion of the bond, and it will give the property time to appreciate enough for you to see a return on your investment. A property purchase should be viewed as a medium to long-term commitment, and as such, it is imperative that you have considered your plans and where you see yourself in the next five to ten years. This could depend on your work situation or family circumstances. If you are ready to settle in one place for a reasonably long period, then you could be ready to get into the market,” he says.

Consider the financial aspects:

When purchasing a property, most are reliant on banks for finance, which means their home buying capability is subject to bond approval. “Your chances of bond approval will be based on the level of affordability you are able to show the bank. This will be based on your level of disposable income and your debt-to-income ratio. In an ideal situation, it is best to pay down debt or get rid of it completely before applying for finance,” advises Goslett. “The idea is to create a large gap between the money you earn and the money you pay out on expenses and debt. Also, 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.

Savings:

While not always easy, putting money aside is a crucial element to preparing to buy a home. “Most people will require a deposit of between 10% and 30% to purchase a home, as well as other costs required 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 needed.”

Consider the timing:

Because buying a home will have such a massive impact on your long-term financial well being, it is vital not to rush into the decision. However, it is also equally important not to let an opportunity pass by just because you are not fully prepared to take advantage of it.

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

What are your expectations:

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 you will face along the way, the result is an appreciating asset and a home that you can call your own,” he concludes.


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