Buying a home is a major step towards creating a haven for your family, and making a long-term investment in your financial future. As such, it is a purchase that should be carefully considered and planned for.
This is according to Steven Barker, Head of Home Loans at Standard Bank, who says the good news is that despite tough economic conditions, funding is available to people wishing to buy homes.
He says as buying a home is so important, it is worth doing some homework before approaching a bank for a loan. Consideration should not only be given to finances, but to the property itself, he says.
This means, buyers should find out more about the area in which the house is situated, the average value of properties in the suburb, and take time to have the house examined for possible defects such as poor plumbing, potential electrical problems and structural concerns such as rising damp.
In addition, always look at the type of ownership you are considering, for example, a freehold (stand-alone) house versus a sectional title (flat or complex) property, as it’s important when buying a sectional title property that you review and understand the financial standing of the complex before you buy into it.
Once you are satisfied with the location and condition of the property, the financial planning process begins.
Baker shares some helpful tips:
1. Checking your credit history
When a bank assesses a person for a home loan, their credit history plays a major part in whether they are suitable. It pays to check your credit rating, to ensure that any outstanding debts are settled and make sure that any accounts you may have are correctly serviced.
– Make sure you have sufficient money to pay a deposit on the house. Although a bank assesses people’s financial situations individually, it is now rare to get 100% bonds.
– Remember the additional costs. These include attorney’s fees, transfer costs and registration fees.
– Enquire about rates and taxes that will be payable on the property.
– Plan for the one-off costs such as electricity deposits, and consider what additions like security are likely to cost.
– Check what insuring the property will cost you on a monthly basis.
– Consider credit life cover to protect the loan outstanding balance in the event of disability, dread disease, retrenchment or death.
3. Future financial commitments
Plan for the future by making sure that your personal cash flow can cope with increased payments if interest rates should rise. By preparing a personal budget that allows for costs to increase, you will avoid future financial difficulties.
Baker says taking a proactive approach to monthly bond payments when buying a house also sows the seeds from which you will reap rewards. He says if you buy a house and can pay extra money on your bond, the benefits can be significant; any additional money paid in is credited against the account and saves on interest costs.
These savings can be significant and knock years off your repayment period, he explains.
Additional money paid in also acts as a buffer against future rates increases, he says. These will have less impact, as you will already have been paying a higher amount.
“A home loan is an investment in your life and the lives of those closest to you. Taking care of your financial status when your house is acquired will bear fruit for many years to come.”