Tracy French, a provincial sales manager for MortgageSA, says it is still possible for you to buy wisely. She says that you should consider property as a solid longterm asset.
Am I ready to buy property?
Whether you’re buying your dream family home or a starter apartment, you’re signing up for a 20-year commitment. You’ll also have substantial upfront costs, including transfer duties and bond registration fees, as well as the schlep of moving and changing your address. You need to be willing to sacrifice some flexibility in your life and take on the responsibility for maintenance. Think about whether you can afford it. Do you have a steady incomei Will you have enough money left to live on — and buy shoes — after you’ve paid the bondd
French also recommends that you stress-test your budget by at least a 3% interest rate increase to check that you will still be able to afford your bond repayments should rates go up even further.
Do I need a deposit
If you’re buying for the first time, you probably don’t have a deposit. If you’re selling a property you already own, the amount you’ve paid off on your previous bond can be used as a deposit on the next one. There are home loans available for first-time buyers which cover the full amount of the house price (ie, you are getting a 100% bond) as well as bond registration and transfer costs, which usually average another 6%. However, any money you have available upfront will help. You’ll end up borrowing less, at a better interest rate, which helps a lot in the long run.
Even if you don’t have a deposit, start saving now. Financial coach Suze Orman recommends taking the difference between what you currently pay in rent and what your bond repayment would be, and depositing this into a savings account every month. She says you should do this for six months to test whether you really are ready to make the extra financial commitment that comes with home ownership. After six months, you should have a substantial amount to put towards your new home. And even if you decide you aren’t ready for the property plunge, you’ll have a nest egg for other investments.
Ok, I’m ready. What do I do now?
Get yourself pre-approved for a bond, either by a bank or a mortgage originator. That way you’ll know how much money you’re able to borrow in order to buy, and what your monthly repayments on that amount would be. Pre-approval is exploratory and does not mean you have to commit to taking out a mortgage bond with that particular institution.
My brother got a great deal on property. I also want to get lucky. Where do I look?
In the property game, you only get lucky by looking… and looking and looking. One investor who has owned literally hundreds of properties, told me, “The more I look, the luckier I get”.
Get into the habit of combing the week- end newspaper property supplements. These have the most comprehensive listings and you’ll get a good idea of where prices are going in the suburbs you’re interested in.
Take a look at www.propertygenie.co.za, run by MortgageSA, which lists properties from all the leading estate agents, or visit www.privateproperty.co.za
If you can stand the regular intrusion, contact a couple of estate agents and tell them what you’re looking for. That way they can bring properties to you.
Robert Kiyosaki, real estate guru and best-selling co-author of Rich Dad, Poor Dad, advises making a habit of driving or jogging through the areas you want to buy into. If you do this regularly, you’ll fi nd out whether you really like the area and would enjoy living there. And you’ll also notice new developments which could enhance the area or destroy your view!
- Look at showhouses. Even if you’re not planning to put in an offer, you’ll get an idea of what you get for your money.
- Be practical. Don’t let your heart overrule your head. Is the location rightu Is the property close to good schoolsa Even if you don’t have kids, proximity to schools will make your property more desirable. What about nearby shopso Can you live with the traffi ct Is the accessibility of public transport important to youe
- Are other developments going up nearby This may mean your suburb is becoming sought-after, but it can also mean that when you want to sell, there could be a glut of homes on the market. If it’s not such a smart area, are there plans in place to combat crime and grimee
What features are important to youc
Here are a couple to consider:
- Will you need a spare bedroom or study
- What kind of security arrangements do you wanty
- Would you prefer a private garden and/or a balcony
- Do you want a lock up-and-go arrangement or are you happier with higher maintenancea
- Do you have petsh
- Do you want access to a swimming pool
- How much parking do you need
- Is the view important to youp
- How much sun would you likei
- And don’t forget rates and levies. These can vary substantially and can make a big difference on a property’s affordability.
I’ve found a place I want to buy. What now?
Firstly, check the contract the estate agent hands you, says Gavin Muller of Virgin Money. When you make an offer, you should be free to choose your mortgage provider and conveyancing attorney. If there are clauses in that contract binding you to certain firms, your choice is taken away.
Shop around for a mortgage. You can apply directly to banks or through a mortgage originator who will negotiate on your behalf — these include MortgageSA, Betterbond, PowerBond and Benefactor. You don’t necessarily get a better rate by using a mortgage originator, but it can help. And some will cover your bond registration costs or give you a cash back amount.
Shop around as much as possible to get the best interest rate possible — half a percent difference may not sound like much, but it will make a noticeable difference to your repayments. If you’re not happy with the rate offered, ask for a better one.
Always pay in a little bit extra on your bond repayments, no matter how small, to give you breathing room in the event of a rate increase. You’ll also shave years off your bond.
Don’t forget insurance
Shop around for homeowners’ insurance or buildings insurance, says French. Under the new National Credit Act, the bank from whom you’ve obtained your home loan won’t be able to force you to buy their policy. This is insurance for the building itself and pays out the replacement cover of your home if it is damaged. The monthly premium ranges from R250 to R500, so it is worth looking at a range of options. According to French, MortgageSA will be launching its own policy soon too.
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