First time buyers - Turning dreams into reality

With house prices still way off their boom levels in most areas, interest rates at their lowest levels in more than 30 years and household incomes on the rise should ensure that first time buyers flood the property market. But Hano Jacobs, CEO of the Reality 1 International Property Group, notes that this is not the case.

“The latest FNB latest survey shows that while first-time buying is on the increase, it still accounts for only 25% of the total number of purchases,” says Jacobs.

The reason, he says, is that many people are still so burdened with debt and impaired credit records following the recession that they cannot qualify for home loans and take advantage of the current advantageous buying conditions.

“However, this does not mean that prospective homeowners should give up on the idea. In fact, they should be doing everything in their power to get into the market now, before prices and interest rates start to rise again. Home ownership is still one of the best financial moves people can make because it delivers tax-free capital growth and a platform for building wealth through further investments.”

In pursuit of this goal, Jacobs says, would-be first-time buyers can follow these strategies to help them get into the market:
  • Get serious about eliminating existing debt such as credit card balances and personal loans as fast as you can. Go over your monthly budget and divert whatever money you can towards the repayment of the loan, try and pay back more than the minimum amount. This will improve your credit score and make it easier to get a home loan.

  • When these debts have been paid off, start saving a deposit. Put the amounts you were paying towards debt reduction, and anything else you can, into a dedicated savings account and you will soon have a ample amount. This will also make it easier to obtain a home loan – and lower your monthly bond repayments.

  • Don’t set your sights too high. Look at what rent you are paying and aim to buy a home such as a flat or a townhouse where the monthly bond repayment will be the same as this rental or less. What is more, there is no transfer duty on homes costing less than R600 000. Once you have a property you have a foothold in the market and in a few years you can upgrade to a bigger or more expensive home.

  • Don’t forget to explore options such as properties available through the bank’s assisted selling programmes. Such properties are often priced at below market value and there are usually further savings to be made on the legal fees charged to handle the transfer into your name.

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