Here are some of the biggest considerations you need to mull over before you sign an offer to purchase:
As a buyer, there are a multitude of costs you need to be aware of that includes a deposit, as well as the bond costs and attorney fees, insurance, and the general upkeep of the home.
So if you are thinking of buying a home and only staying short-term then it obviously doesn't make financial sense to purchase a home. Ideally, a buyer should be planning to either stay in or hold onto their property for a period of at least seven years, but preferably longer. This will give you time to pay a large portion on the bond and hopefully for the home’s value to appreciate enough to see a return on your investment when you sell.
Consider your future plans and where you see yourself in the next five to ten years. If you are ready to settle down in one place for a long period, you might just be ready to buy.
The large majority of South Africans will be loan-dependant when buying a home. What this means is that their home buying ability will be subject to bond approval with a bank.
A buyer’s bond approval success will be based on their level of affordability, which is affected by their debt to income ratio. It is best for a potential buyer to pay down their debt as much as possible before applying for finance.
You should focus on creating as big a gap as possible between the money you earn and the money that is paid out to expenses and debt. It is important that you don’t make any large purchases during this time, such as buying a new car, for example.
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.
Saving is a vital part of homeownership preparation. Apart from the fact that most buyers require a deposit, there are other costs that they will need to carry during the buying process such as 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. 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 the need arises.
Due to the impact that buying a home will have on your long-term financial wellbeing, it is vital that you don’t rush into a decision. However, it is also equally important not to let an opportunity pass just because you are not fully prepared to take advantage of it.
Timing is a crucial factor when it comes to homeownership readiness. Ideally, a buyer needs to be ready to buy, but should also be able to wait if required. Buyers need to give themselves enough time to research and find the right property but don’t want to be in a situation where they have started too early and still have six months left on their lease agreement.
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, although there are some challenges that homeowners will face along the way, the end result is an appreciating asset and a home that they can call their own.