News & Advice Trending

property-working-for-you

We all need somewhere to live and buying a property is a significant, long-term financial investment, leading many to speculate whether it really is best to buy, or rent.

The answer depends on why you’re buying, and what you do with the property.

“Buying a home gives you a place to live (which is an immediate need) and, will hopefully appreciate in value over time. It’s true that buyers need to take a long-term view in terms of their new home as most get between 20 to 30 year home loans. What they don’t realise though is that an extra payment of as little as R500 per month can quickly alter the playing field”, says Bruce Swain, MD of Leapfrog Property Group. 

Determine the length of your home loan

“If you’re buying a home to live in, as opposed to renting it out, my advice would be to get a 20 year home loan (if possible) and to pay it off as soon as possible. First pay off the credit cards and the car, then pump the rest of the money into the home loan; reason being that you’ll get rid of debt, while retaining access to your home loan – should you want to use it as a savings vehicle or need to draw on your bond to cover an emergency”, explains Swain.

Use your home loan to save

If a buyer purchases a property for R1.2 million, with a deposit of 20%, with a repayment at 11% over twenty years, it will cost the buyer R9,819 per month (excluding interest and municipal rate fluctuations).

However, if the buyer increases their repayment by R500 per month the term reduces by 3 years, with a saving in interest of R251,484. Increasing the repayments by one thousand Rand per month, reduces the term by 5 years, saving the buyer R409,140 in interest.

“Look at it another way; by depositing your savings into your bond you’ll be receiving the interest your bank charges on your home loan as positive interest on the monies you’re investing. If you have a mortgage of R2 million and pay in R100 000 you’re now only being charged interested on R1.9 million. The money you save in interest is now the positive interest you’re receiving on the invested funds – and can be withdrawn if needed”, explains Swain.

Invest your savings

This saving could be put towards a child’s further education, invested or even used to obtain a mortgage for a second property.

The savings on interest could also be put aside for alterations or perhaps adding a granny flat to the property for extra rental income.

“Not only does paying your home loan off faster help you in the long run, it enables you to use your property as an asset years before you sell it”, believes Swain.

This article “Making Your Property Work For You” was issued by Leapfrog Property Group.

Leave a Reply

You might also like...

Buy-to-let buying remains weak, according FNB Survey
10 Steps To Choosing The Right Investment Property
10 Common Mistakes First-Time Home Buyers Make
3 Tips For Building A Successful Property Portfolio
Property Practitioners Bill – Why Should The Consumer Give A Hoot?
Why A Good Sale Actually Starts With A Good Sale Agreement
4 Top Reasons To Buy a Home In The Summer
Know The Lowdown On Letting Out Your Property
When Is The Right Time To Buy Property?
Make an Informed Decision When Buying a Fixer-Upper
10 Common Mistakes First-Time Home Buyers Make
All That Twitters Is Not Sold
Running Behind On Your Home Loan Repayments? Here’s What To Do!
6 Surprising Things Home Buyers Notice First In A Home
Does An Open Mandate Delay a Home Sale?
What’s The Full Price Of Buying a Home?
Promising Residential Market Despite Recession
10 Questions To Ask The Real Estate Agent During a Show House
Neglecting Home Maintenance Will Damage Sale Price
Property Practitioners Bill – Why Should The Consumer Give A Hoot?
4 Top Reasons To Buy a Home In The Summer
When Is The Right Time To Buy Property?
Make an Informed Decision When Buying a Fixer-Upper
10 Common Mistakes First-Time Home Buyers Make
8 Greatest Concerns Keeping Property Investors Awake
6 Surprising Things Home Buyers Notice First In A Home
10 Important Questions To Ask The Agent Before Buying A Home
What’s The Full Price Of Buying a Home?
6 Defects To Watch Out For When Buying Property
10 Questions To Ask The Real Estate Agent During a Show House
4 Ways An Offer To Purchase Can Lapse
First-Time Home Buyer? How To Avoid Tax And Get Up To 44% More Space
Is Now The Right Time To Upgrade To a Bigger, Better Home?
Is Investing In Property During The Recession Still A Good Idea?
Property Practitioners Bill – Why Should The Consumer Give A Hoot?
Why A Good Sale Actually Starts With A Good Sale Agreement
What Are The Tax Implications Of Selling Your Primary Residence?
5 Unexpected Expenses When Selling Your Home
How To Get Ready To Sell Your Home In Spring
All That Twitters Is Not Sold
5 Expensive Mistakes Made By Home Sellers When Selling A Home
Does An Open Mandate Delay a Home Sale?
8 Tips On Selling an Empty House
Neglecting Home Maintenance Will Damage Sale Price
The Do’s And Dont’s of Selling Your Home
4 Clear Signs It’s Time To Sell Your Home
Which Are The Pitfalls Of Using Multiple Agents?
4 Things Agents Consider When Setting The Asking Price
Top Tips For Selling Your Home in Winter
Looking For A Rental Property? Make Sure You Are Rental Ready!
Know The Lowdown On Letting Out Your Property
How Much Should You Spend On Rent A Month?
#SmartHomes: The No.1 Tenant Amenity Today Is Wi-Fi
Demand For Rental Properties Rising Due To Low Confidence Levels
What About Pet Ownership In Sectional Title Schemes?
Why Creditworthiness Is Just As Important For Tenants
Factors To Consider When Letting Out Property
New Landlords Need Experienced Agents
The Perils of Rising Consumer Debt For Landlords
First-Time Tenant? What You Need To Know
Average residential rental values on the increase
Is It Possible To Terminate A Lease Agreement Without Recourse?
New Generation Digs Now On The Rise
When Is Your Rent Due?
3 Helpful Tips For a Stress-Free Moving Day
Divorcing And Need To Sell? 3 Possible Options
5 Mistakes To Avoid When Relocating
7 Tips For Packing And Moving Quickly
Moving? Things To Think About!
Maximising Small Spaces
7 Tips To Help Your Children To Adapt To The Move
What To Do With Your Home When You Have To Relocate
Moving With Pets Can Be Tricky
Estate Agent Moving Tips
Telltale Signs You Need A New Home
Seven Signs You Need A New Nest
Über Wealthy On The Increase And On The Move
What Are The Tax Implications Of Selling Your Primary Residence?
5 Unexpected Expenses When Selling Your Home
8 Greatest Concerns Keeping Property Investors Awake
Running Behind On Your Home Loan Repayments? Here’s What To Do!
5 Financial Tips To Stay Afloat As a First-Time Homeowner
First-Time Home Buyer? How To Avoid Tax And Get Up To 44% More Space
Repo Rate Cut: Encouraging News For Home Buyers
Is Investing In Property During The Recession Still A Good Idea?
4 Hot Tips For Investing In Student Accommodation
Make Your Bond Work For You
Energy-Saving Tips For Your Home This Winter
Costs To Consider When Investing In Property
Smaller Properties Yield Great Investments
8 Myths Preventing People From Real Estate Investing
Own Fixed Property? You Need a Will!
5 Reasons You Should Work With a Real Estate Agent
Is Hosting Your Property On Airbnb Legal?
How To Protect Your Commercial Property Investment
Commercial property still important asset class for private buyers
Know The Risks Before Building Airbnb Castles In The Sky
Green Buildings Catching On In South Africa
Digital Disruption And The South African Commercial Real Estate Market
Can You Run A Business From A Sectional Title Home?
What’s Driving Change In The Commercial Property Sector?
5 Ways Commercial Property Space Planning Can Save You Money
Investing In Commercial Property an Attractive Option
3 Obvious Signs That It’s Time For Office Relocation
3 Things You Need To Know Before Buying Vacant Land
Price Correction In Commercial Property Market
South Africa: Evolution of Industrial Properties