select
|

How much home can I afford?

Buying a home ought to be an exciting, enriching experience – but it can turn into a very frustrating and embarrassing one if you spend weeks finding the “perfect” home only to discover that you can’t afford it.
 
It’s always better to know your price range before you start looking for a home, says Richard Gray, CEO of the Harcourts Real Estate group, and for most people this will be determined by three factors, which are:

- The size of the home loan for which you can qualify;
- The amount of cash you have available for a deposit and transaction costs such as transfer duty, bond registration and legal fees; and
- The price you actually think is reasonable and realistic in terms of your own housing requirements and other financial goals.
 
“Although some buyers can pay cash for a property,”he says, “by far the majority need to obtain a bond from a bank to finance their home purchase - and they may not be able to borrow as much as they think.
 
“The banks determine how much they are willing to lend to a particular borrower after examining his or her credit record, employment history and current financial situation. Under the strict rules of the National Credit Act, they have to ensure that the borrower could comfortably afford the new loan repayments in addition to any existing financial commitments and living expenses, and would not become over-indebted even if interest rates were to rise.
 
“Consequently, even people with high incomes might not be able to obtain as big a mortgage as they might expect, if they already have many other debts that are eating into their disposable income each month. And that would be a pointer to focus their attention on less expensive properties than they might initially have targeted.”

Meanwhile, he says, those who don’t have many debts and have saved up cash for a deposit and transaction costs might actually be able to afford a higher-priced property than they originally thought, because the size of the home loan they require will be reduced by the amount of the deposit.
 
“However,” he cautions, “they might do better to still opt for the type of property they initially had in mind, take a smaller loan and keep their monthly home loan repayments as low as possible. Smaller bond repayments certainly give borrowers more leeway when interest rates increase, and often also give them the ability to pay their home off more quickly. Smaller homes also cost less to run and maintain.
 
“In addition, everyone has their own ‘comfort level’ as far as debt is concerned, and prospective buyers should think about this ahead of time so that their home purchase does not become a burden instead of the pleasure it should be.” 


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 24 Nov 2017
      Demand for secure estate living in Hout Bay has risen sharply in recent years, precipitating a spike in development with estate homes now accounting for 20.24% of the property landscape with the launch of an exclusive new gated development on 26 November adding 20 more units to the existing 1250 estate homes.
    • 24 Nov 2017
      There are some things that money can’t buy – spectacular views from Mouille Point to the V&A Waterfront and a trendy and lively neighbourhood that encapsulates the very best of the Cape Town lifestyle.
    • 24 Nov 2017
      Tshwane’s four-bedroom Mayoral mansion, nestled among ambassadorial residences in the upmarket suburb of Muckleneuk, fetched R5.1 million after spirited bidding at High Street Auctions’ final sale of the year.
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK