So how do you get yourself into a position where you can afford to take on this important investment? With a salary of more than R15 000 a month, the options for first-time buyers are limited. If you earn less than R15 000 and you don’t find a home in the price category you qualify for, you’ll need a substantial deposit to afford a property you like.
What it boils down to is: to afford to buy property you’ll need to save. One of the biggest obstacles to saving is short-term debt, so if you have numerous store accounts, start getting rid of them. This will help you save enough for a deposit more quickly. Another saving mechanism is to choose cheaper accommodation while you’re renting (stay in a not-so-up-market area or in digs) so that you’re able to put away some of your salary every month.
And talk to your bank manager: she’ll help you work out how much you can afford. Plus, she can advise you on how to attain a pre-approval certificate, which will give you more bargaining power because the seller will know that you are a serious buyer. Also make sure your credit record is healthy.
Some people are opting to go into the market with a friend or relative. But before you do, you need to make sure your property partner is in it for the long term, and you have to be able to trust the person. Make sure you have an exit plan in place in case one of you needs to sell. (People change jobs, get married; get divorced and go on trips into the desert to find themselves.)
As a first-time buyer you may need to accept far more modest accommodation at first – look at buying a bachelor apartment in a not-terribly-trendy part of town. Another option would be to buy a larger, older home that enables you to rent out a section or have housemates. Bond approval gets tricky, though, as you need to secure rental agreements from tenants before the bond can be processed.
Buying off plan can also be a good idea. Prices are cheaper than if you wait to buy the same unit once it is built. But these off-plan units are often very small, so make sure you know how many square metres the property covers (excluding covered patios and garages).
THE HIDDEN COSTS
There are a number of costs involved in buying a home that can be overlooked. Don’t get caught out!
| 1. Transfer Fee |
This is the largest hidden cost. Transfer fees are around 8% on a house exceeding R1 million, says Praven Subbramoney, Head of Pricing, Profitability & Capital Management at FNB Home Loans. They are paid to the government for the privilege of changing ownership. Transfer fees for the first R500 000 are free, he says. For amounts between R500 000 and R1 million, you’ll have to pay a 5% transfer fee and when you move up to a house costing over R1 million, you will have to pay the 8% transfer fee as well, says Subbramoney. Therefore, on a house costing R1.5 million, the transfer fee would be R65 000 (R25 000 + R40 000), he explains. |
| 2. Bank Charges |
| 3. Ongoing Monthly Costs |
| 4. Loan Interest |