Although homeownership is a goal for many South African consumers, if a person purchases a home before they are ready to do so, it could be a big mistake that ends up costing them dearly, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
He notes that buying and owning a home has numerous benefits, which include providing the homeowner with a sense of stability along with the freedom to make their own choices about what happens to the property.
“Owning a property allows the owner to renovate if they want to or rent out the property to earn additional income – the decision is theirs to make. However, along with the freedom comes the additional responsibility and cost of maintaining the property. These are but a few of the elements that potential buyers need to consider before they purchase a home,” says Goslett.
According to Goslett, the first and most important consideration for a potential buyer to make when deciding whether or not they are ready to enter the property market is affordability. Assessing one’s own affordability requires reviewing current lifestyle factors and financial status. It is vital that buyers are completely honest with themselves at this stage.
“While the buyer might be able to afford a smaller property, if it does not meet their current lifestyle requirements perhaps it is best to hold back for the time being and save up more for a larger deposit,” advises Goslett. “It is also important to remember that affording a home is not just about making the bond repayments, it also involves maintenance costs and rates and taxes among others.”
He adds that another aspect of affordability is the nature of the buyer’s current financial situation. While it is impossible to tell what is going to happen in the future, it is essential that the buyer has a contingency plan in place should their financial position change in any way.
“Purchasing a property and then selling it within a short period of time could leave the homeowner in a worse financial position than they were before they bought the home. This is why buyers need to ensure that they can hold onto the home for a reasonably long period of time to maximise their return of investment at sale. It is vital for homeowners to have savings available to cushion them and help them to continue making bond repayments in the event that they lose their job. These savings should be able to see them through for at least two to three months or until they find new employment,” says Goslett.
Another careful consideration that needs to be made is the buyer’s future plans. Purchasing a home means committing to that home or area for a long period of time.
“Due to the long term nature of homeownership, a buyer needs to be sure that they are prepared to stay within the home and neighbourhood they select for a number of years and that the home they choose will accommodate their future plans. For example, for buyers planning to have children, proximity to good schools could be a priority, while older buyers facing retirement might want something further away from the hustle and bustle.” explains Goslett.
He emphasises the importance of saving for those consumers who are preparing to buy a property. Having as much savings as possible will give the buyer more financial options. “For example, a larger deposit can result in a larger home or a lower bond repayment. There are also legal fees, transfer duties and homeowners insurance that will need to be covered,” says Goslett. Consulting with a property industry professional or a mortgage originator such as BetterLife Home Loans will give the buyer an indication of what costs will be incurred during the purchasing process and how much they can actually afford to spend on the property.
Goslett advises that, if possible, potential buyers should work on reducing their debt levels before purchasing a home. Having more disposable income will be viewed favourably by banks when applying for a bond as well as help to alleviate some financial pressure on the buyer when it comes to meeting monthly payments.
“Due to the gravity of the decision to purchase a property, potential homeowners should take their time and make sure that they are completely ready for the commitment of owning a home before they sign an offer to purchase,” Goslett concludes.
This article “Are You Ready To Own A Home?” was issued by RE/MAX Southern Africa – http://www.remax.co.za/