How different life stages affect homeownership

Each new stage of life presents its own set of unique challenges in terms of homeownership. The good thing is that with the right preparation and planning, each new set of circumstances can be viewed as an exciting opportunity rather than a daunting season filled with obstacles to overcome.  

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that no matter where an individual may find themselves in life, the need for housing will always exist. “Rather than carrying a monthly expense in the form of rent, individuals could be investing into their future wealth by paying off an appreciating asset in the form of owning their own home,” he explains.

To help South African steward this investment well, RE/MAX of Southern Africa provides a few tips about what to watch out for in terms of homeownership at each stage of life.    

Graduates carrying student debt

While paying off student loans and any other forms of debt should be the first priority, all debt does not need to be paid off in full before one can apply for home finance. The goal should be to show the necessary affordability ratios (i.e. debt to income ratio) for bond approval. The chances for bond approval increases if one can show that there is a plan in place to pay off existing debt as quickly as possible. Even a small additional payment can make a big difference in reducing debt levels and showing steady progress. Having an emergency savings fund can also help in this regard. A set amount should automatically be transferred to savings each month – not only will this help with bond approval, but it will also help cover the costs of any unexpected expenses without taking on additional debt.

Newlyweds

Those who are newly married should consult with a tax professional to determine how this may have impacted their tax status – especially if either party owns property. For example, SARS requires consumers to inform them of their marital status as the disposal of assets has capital gains tax implications in the joint estate of spouses married in community of property. Reviewing finances and having everything in order will make it easier when it comes time to submit annual tax returns. If the couple weren’t living together before the wedding, newlyweds will also combine home and contents insurance and other household expenses, such as electricity and groceries. It is advisable that any money saved by the couple in this regard goes towards a household emergency savings fund or possibly towards a savings account for when the couple is ready to upgrade to a larger home.

A growing family

Life changes constantly – especially with a growing family. It is advisable for households to review the financial plan annually by looking at their available resources, goals, and priorities. During this time, homeowners should re-evaluate their situation and include any major life changes that may have happened in the last year, such as the birth of a child or starting a new remote working lifestyle. All these factors play an important part in possibly changing the projected time frame to meet financial goals. A growing family who is living in a home that no longer meets their needs will want to make a change sooner rather than later. This would mean that more money would need to be set aside for the deposit and other costs associated with buying a home.

Planning for retirement

When one finally reaches the golden years of retirement and is living off savings or a pension fund, owning a home that is paid off in full can be incredibly helpful. Not only does this reduce monthly expenses, but it also provides an asset that could be sold if the individual runs into financial difficulty. Planning for this in one’s younger years will prove invaluable for future financial security.  

“A professional financial planner would be useful when it comes to developing strategies to meet ever-changing lifestyles, goals, and priorities. Having a working relationship with a reliable real estate professional will also prove helpful in this regard. While a household may not be in the market at the moment, life could change in an instant. Keeping in contact with a reliable real estate professional will help homeowners stay informed of current market trends which will go a long way towards helping them become better prepared for if and when the need to buy or sell suddenly arises,” Goslett concludes.