Are you ready?
While home ownership has become the goal for many South African consumers, buying a home too soon without completing the necessary research can leave homeowners with a very expensive noose around their necks, says Adrian Goslett, CEO of RE/MAX of Southern Africa.
He says purchasing and owning property has many benefits while also providing a sense of stability and the freedom to make decisions regarding what happens to that property. Whether the owner wants to renovate or rent the property out, the choice is theirs. “However,” says Goslett, “along with the freedom homeownership brings, there are more responsibilities as well as additional costs that buyers should consider before entering the market.”
Goslett says that the first step for a buyer to consider when assessing whether they are ready to purchase a home is to see what they can afford. Buyers will need to look at their lifestyle and financial health to determine whether home ownership is right for them at this stage. If a buyer is unable to afford a home that meets their current requirements, then they may have no other choice but to continue renting for a while. It is important for the buyer to take into consideration all costs involved such as maintenance costs and rates and taxes, and not just the bond repayment when looking at their affordability.
According to Goslett there are opportunities available in the current market for buyers to purchase good value-for-money properties, but buyers must make sure that they are in a financial position to be able to afford the home over the long term. Although unforeseen circumstances may occur, purchasing property should be viewed as a long term investment and buyers could end up losing money through re-selling a property within a few years. Generally, due to the cyclical nature of the property market, a minimum period of nine years is required to see the best possible return on investment.
While having a steady income and stable job will be an important part of assessing home buying readiness, it is also important for buyers to have a contingency plan in place should they lose their employment. It is vital for homeowners to have savings available to cushion them and help them to continue making bond repayments for the next two to three months or until they find new employment.
Goslett emphasises that buyers will need to save, save, save. Having as much savings as possible will give the buyer more financial options. “A bigger deposit, for example, can result in a larger home or a lower bond repayment. Financial institutions require a deposit of between 10% and 30% before a loan is granted and there are also legal fees, transfer duties and homeowner insurance that will need to be covered,” he says. Speaking to a property industry professional or a mortgage originator will give the buyer an indication of what costs will be incurred during the purchasing process.
He says that where possible, potential buyers should deal with any debt that they may have before purchasing a home. Having more disposable income will be viewed favourably by banks when applying for a bond as well as alleviating some financial pressure on the buyer to meet monthly payments. “If buyers have debt such as credit cards or clothing accounts, it is generally a sign that they are living beyond their means and they may want to determine what they can pay off before deciding to take on a bond and the costs of owning a property,” says Goslett.
Homeownership is not a decision to be taken lightly, says Goslett. “As buying property is a long term commitment, it is vital that the buyer is ready and prepared to make that commitment.”