Ricochet News

Ready, steady, go now for homebuyers

Dec 21, 2017
Ready, steady, go now for homebuyers

There is a new energy and confidence in the property market in the wake of the ANC‘s elective conference this month, and those who have been saving and planning to buy a new home in the new year should get ready to move fast, says Gerhard Kotzé, MD of the RealNet estate agency group.

“It is always better to buy sooner rather than later when it comes to real estate, because even when they are rising only slowly, home prices do keep going up. And given the current optimism about SA’s economic prospects, it seems they may start rising faster than the current low GDP growth rate might indicate. Delaying a purchase is thus likely to mean that you will shortly need a bigger home loan to buy the same property – and a higher salary to qualify for that loan.

“In addition, buying a home is the most efficient way for most people to start building up their personal wealth, and the earlier a purchase is made, the faster that will happen. You will gain more and more equity in your property by reducing your home loan balance as the value of the home climbs.”

However, he says, prospective buyers do need to be well-informed and financially prepared for the long-term commitment of buying a property. “For example, they need to make sure that they will not be stretched to the financial limit just to pay their monthly bond instalment, as they would then be at risk of losing their homes should interest rates rise.

“So to make sure that they are ready for home ownership, they should start by reviewing their monthly household budget. The costs of owning a home as opposed to renting one include municipal rates and service charges, property insurance, and any monthly levies payable in a sectional title or estate development, and there must be enough in the budget to cover these costs in addition to the monthly bond repayment.”

Next, Kotzé says, prospective buyers must make sure they have enough savings to cover the “hidden” costs of purchasing a home, in addition to the deposit they plan to put down. These costs include the bond registration fee, legal fees, transfer fees and transfer duty if the home costs more than R900 000, and they will have to be paid in cash before the property can be transferred and registered in the buyer’s name.

“Thirdly, buyers should budget for regular maintenance of their property and any repairs that may be necessary in order to keep it in good condition and protect its value. The added benefit of doing this is that it will give them some extra flexibility in the event of interest rate increases that push up their home loan instalments.”

Fourth, he says, those who intend to apply for a home loan need to make sure that their credit record is clean – and take any remedial action that may be necessary to get it that way. “They might not have any debt judgments against them, but small forgotten bills from a few years ago or a series of late payments on any account could take a few weeks or months to fix, and lengthen the buying process.”

Then lastly, Kotzé advises, prospective buyers should get a home loan pre-qualification certificate from a reputable bond originator such as BetterBond before they start looking at homes to buy.

“This will give them a solid idea of their current purchasing capacity, so they don’t look at homes they simply can’t afford. It will also help them to get an offer to purchase accepted, because it gives property sellers the assurance that they are already on their way to obtaining the finance they need to go through with the transaction.”