Starting the journey towards buying property can be both thrilling and daunting, requiring extensive research and information. The current unstable economic conditions do not seem likely to improve for consumers in the near future. This makes the dream of purchasing a home even more uncertain for South Africans.

The South African Reserve Bank has officially announced that the repo rate will stay at 8.25%, with a potential decrease to 7.3% in 2025, although this is subject to change. Interest rates are expected to drop by 1% this year, offering some relief to consumers, but not across the board. Additionally, inflation has a direct impact on potential homeowners.

Unstable Economic Conditions May Impact Your Purchase.

Inflation Rate 

If inflation remains high, consumers may see a notable decrease in their available income. It’s worth noting that many South Africans may experience challenging economic consequences if interest rates continue to remain high. Furthermore, Monthly repayments are necessary to secure the property and manage risks, aiding new homeowners in making informed decisions and planning effectively.

At Vantage Debt Management, we have noticed a concerning trend in the South African property market- many young homeowners need assistance to meet their monthly bond repayments. This highlights the importance of making research and information readily available to young individuals and couples.

Expenses Related To Buying New Property

New homeowners should know the costs associated with owning a home, such as transfer duties, bond registration for changing property ownership, and legal representation fees. Typically, the larger the purchase price of the home, the higher the transfer duty.

These costs are necessary to help facilitate the process with the bank or their legal representatives. It’s important to note that finalising these processes with attorneys and the deeds office can take a few months before you can move into your new home.

Joint Bond Vs Single Bond 

Joint bonds offer the advantages of shared liability, increased borrowing capacity, and enhanced credit affordability, making a suitable financing option for entities with complementary credit profiles. 

Pro: Joint bonds offer shared liability and an increased borrowing capacity, with a higher affordability.

Con: If your joint bondholder is unable to pay their portion of the bond, you might become liable and it could affect your credit rating. You should choose someone you trust and have good relations with, and be wary of any unpaid payments or potential disagreements.

Make Sure You Save Up For A Deposit

Having a large deposit can decrease the cost of your home substantially. Paying a deposit on your home upfront can reduce your monthly bond repayment immediately. Many consumers save up for years before buying their dream homes. Although the banks now give 100% bonds, opting to pay a deposit can give you access to a higher-value property.

Monthly Bond Repayments

There are two types of lending agreements: fixed and variable. Interest rates in a variable lending agreement are influenced by your credit score, risk, and fluctuating repo rate set by the SA Reserve Bank and prime lending rate. Moreover, if the repo rate decreases, bond repayments will also decrease, providing homeowners with an opportunity to increase their free cash flow. However, the inverse is also true if the repo rate rises.

Pro: A fixed agreement means you can always be certain of the costs.

Cons: With a variable agreement, you may feel the impact of economic and government policy changes.

Insurance

Homeowners are always advised to insure their homes and belongings in case of unexpected events. It’s important to have insurance to cover costs for things like water leaks or break-ins, rather than having to pay out of your own pocket. In addition, it is recommended to think about life insurance when purchasing property. This can help cover mortgage payments and insurance costs in the event of your passing.

Rates & Taxes

Purchasing property means being responsible for municipal rates, taxes, and utility bills. Understanding the costs and fitting them into your budget are necessary steps toward making your dream of homeownership a reality. The taxes and rate billing of the property include road maintenance, garbage collection, and street lights. If you are residing in a complex you need to pay levies in addition to your rates.

Maintenance 

Being a property owner means you are responsible for all general maintenance and repairs. This may involve making claims with your insurance company. If your home is uninsured, you will be responsible for paying all expenses yourself. These costs can accumulate over time as your property ages.

Seeking Help From A Financial Planner/Advisor

Buying your own home is a significant milestone and a dream come true for many consumers. Asking questions and making Inquiries about the property that catches your eye is always advisable. This will help you budget and plan effectively for your dream home: 

1. What can I/we comfortably afford to pay towards a bond each month?
2. Is it a good long-term investment, can I expect appreciation?
3. Reasons for selling?
4. Is it a safe neighborhood?
5. Ongoing costs of the property?
6. What’s included when buying the property?

These questions will help you gain a clear understanding of the neighborhood you wish to move into. This will enable you to assess the environment and the safety of your investment when building something for your family. Additionally, it’s encouraged to seek advice from professionals when making important financial choices.

Looking At Remortgaging As An Option

Remortgaging is a great way to access cash at a lower interest rate. Remortgaging means using the equity in your property to access cash. The bank has your property as collateral so they may be willing to give you an access bond. You can do this at the same bank or even look at transferring the entire bond to a new bank.  As you increase your bond amount, your monthly repayment will also increase. If you opt for remortgage with a new lender, they will take over your current debt. It’s important to research thoroughly to make sure the new deal is advantageous and does not negatively impact your investment.

The Idea Of Owning Your Own Home May Be Enticing You.

As a first-time home buyer, it’s vital to gather information and research to ensure your income and expenses align with your financial responsibilities, without compromising the standard of your life.