13 September 2018
Buying your first home is both an exciting and a stressful experience. It’s probably the biggest long-term financial commitment you will make in your life, so it’s important to know what you are getting yourself into. You don’t want to make a poor investment or over-commit yourself financially.
Save, save, save
Saving for a home loan is the first vital step in becoming a homeowner. The bigger your deposit, the less you will owe and the lower your monthly repayments will be, making your home loan repayment more affordable.
Before applying for a home loan, calculate how much you can afford to pay every month towards your home loan. Take a serious look at your average monthly budget. Consider your income and expenses, including food, entertainment, car finance, insurance, policies etc. Then, figure out what you have left after you pay all of those bills. A general rule is to limit your monthly home loan instalments to less than a third of your net income.
Keep interest rates in mind. Interest is added to your loan amount as a lending fee. This rate is based on the prime interest rate and as interest rates fluctuate over time, your monthly instalments may decrease or increase accordingly. Make sure you can afford an increase in interest rates if it happens.
All the little extras add up
In addition to home loan repayments, home ownership comes with lots of monthly expenses, including water and electricity, rates and taxes, levies for a sectional title property, insurance, unexpected repairs and maintenance as well as security fees. Make sure you consider this when you are deciding how much you can afford.
Get professional guidance
Speak to a financial adviser or your Private Banker for an expert perspective on finance, affordability and how the process works. Banks will give you a pre-approved bond, so you know how much you can afford.
Location, location, location
Take the time to look at the area you are interested in and the average house prices. It’s a good idea to research properties online or consult a reputable estate agency that specialises in the area you are interested in.
You should also consider your lifestyle in the medium term. Are you planning a family and will need more rooms? How far is it from your office? Are there good schools in the area? Do you have easy access to health care or recreational facilities? What shops are there in the area? What is the crime rate like?
Don’t buy in haste, be an informed buyer. If you find a home you love, make sure you inspect it properly – from the roof, to the wiring and plumbing. It places you in a better position to negotiate the price.
Sign on the dotted line
Once signed by both parties, the offer to purchase constitutes the deed of sale and becomes legally binding. It contains all terms and conditions agreed on by the buyer and seller, such as the sale being subject to home loan approval or to the sale of another property.
An attorney can assist to ensure the contract meets the necessary requirements and that the process is smooth.
Transferring the property
The transfer process can take up to three months (sometimes longer). To ensure that the process is a smooth one, submit all the required information and documents on time and follow the process. This will avoid unnecessary delays in the registration of the property.
Here’s how the process works
The transfer attorney, appointed by the seller, prepares the title deed, rates clearance certificate (proof from the municipality that rates and taxes are up to date) and cancellation figures from the bank. The buyer will pay transfer duty (property worth more than R900 000) and the transfer attorney’s conveyancing fees.
The bond attorney prepares the home loan documents with the buyer, including the home loan account.
Once received, the transfer attorney will submit these documents to the deeds office and the
cancellation attorney will receive copies for cancellation of the seller’s bond.
Once all documents have been signed and costs paid, the information will be simultaneously lodged at the Deeds Office for verification. When it is verified, the attorneys will be notified.
On the day of registration, the bank pays out the home loan amount and the buyer officially becomes the property owner.
Repay as much as you can into your home loan every month. By just putting in a few extra hundred rand a month you will save yourself thousands of rands over a 20-year home loan term.