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Even though interest rates were relatively low for most of 2021, some of the greatest increases in recent years started to occur in 2022.

Before the end of 2022, the current interest rate of 9.75% is predicted to rise by an additional 25 basis points.

The impact of this rise on home loan repayments has been particularly difficult for many South Africans, even though a 1.25% boost may appear tiny to some wealthy homeowners. A precise balance must be struck between affordability, income, and interest rates; frequently, little changes can have a significant impact.

Some homeowners may suddenly find themselves struggling to make their monthly payments and trying to cut their losses, even though selling a property is frequently the final option for financially challenged homeowners.

The simplest way to make a quick buck would seem to be to sell your house, but you must first run the numbers to make sure it makes sense. Timing is crucial since it may be challenging to find a buyer if there are currently too many similar-priced properties on the market in your neighborhood.

Will my house turn a profit?

First and foremost, the likelihood of making a profit will be higher for individuals who made a deposit and diligently paid down their bond over time.

To determine if it is time to sell your home, some basic math should be done. It’s important to remember that this equation does not account for inflation or the property’s market value.

The cost of purchasing the property must be compared against the costs associated with being a property owner.

When calculating costs, it’s important to take into account things like transfer duties and conveyancing fees (paid at the time of purchase), bond costs, rates, and taxes, interest paid on the mortgage over the loan term, house renovations, repairs, levies, special levies, and additional security. Remember that you must also factor in the agent’s commission, which is often between 3 and 5% of the sale.

You can deduct these costs from the rental income you received if you rented out the property. If the property is your primary residence, you must take into account the rent you would have paid during this time. For instance, you would offset R900,000 if you had paid R15,000 in rent over a five-year period.

The sum total is referred to as the break-even value. You must sell your house for this amount in order to break even. Profit is anything over and beyond.

If the damage is still too severe,

If your calculations show that you are still far from making a profit, we strongly advise you to take one of the following alternate routes:

If renting is a feasible alternative, think about moving into a more affordable home until the bond has been reduced and the market is improving.

If you have additional living space on your property, such as a cottage, a garage that has been converted, or a flatlet, you should tidy it up and rent it out for extra money.

Reduce excessive spending to make sure you can pay back your bond each month. The first thing you should do when facing economic issues is to make an attempt to budget and give up certain frills. You might find that your financial situation is more secure than you initially anticipated.

It is strongly encouraged that you boost your monthly home loan payment if you frequently find yourself with excess money at the end of the month so that you can pay off your bond more quickly.

Property is a terrific investment, but if you have to sell, you lose money; therefore, before you sell as a last choice, take the previously mentioned possibilities into consideration.

Finally, buyers might still benefit from an extended buyers’ market if they are debating whether now is a good time to purchase real estate. Now is an excellent moment to negotiate a fair price on a house in a desirable neighborhood, but when calculating the math, keep in mind the true cost of ownership.