First-time homeowners put themselves at risk of losing their new home by not budgeting carefully for additional costs.
New owners are often taken by surprise at the additional costs that come with a home and need to carefully consider their budget before becoming over indebted with unnecessary expenses such as new furniture.
“Although it is very exciting to take ownership of your first house you need to take particular care to budget as a new home comes with lots of new expenses,” says Dr Simphiwe Madikizela, head of projects at FNB Housing Finance, FNB’s affordable housing division.
“In FNB Housing Finance, 96 percent of all purchases are by first time buyers, who are not always aware of the additional cost pressures that come with homeownership,” says Madikizela. “One of the most common mistakes we find is that new homeowners, in their excitement, acquire unnecessary and dangerous amounts of debt buying furniture on account.”
He says you shouldn’t be tempted to buy everything for your house on hire purchase.
“You may not realise that these furniture accounts can lock you in for another 12 to 24 months before you can pay them off. This causes a great amount of unnecessary pressure on your budget and could put you at risk of defaulting on the more important costs, such as bond repayments.”
He says you should look at borrowing the bare essentials or get family to donate old furniture that you will need to start off.
“Take your time buying furniture, hunt for second hand items and the best deals. And save for special items that you may want rather than buying them on account.”[clickToTweet tweet=”There are a number of costs that are unavoidable and that you need to budget for over and above bond repayments.” quote=”There are a number of costs that are unavoidable and that you need to budget for over and above bond repayments.”]
These responsibilities include water, lights and municipal rates. Water and electricity will be a factor of your own usage but municipal rates are the taxes that are paid to the municipality for providing essential services such as road maintenance. This is a fixed cost depending on your building size.
Homeowners insurance will also be a new bill. It is important that the structure of your home is insured. It is also a good idea to insure your home contents and to work this into the household budget.
“Another cost that new homeowners don’t take into account is the ongoing maintenance of a property,” says Madikizela.
Properties require care nearly all the time as wear and tear take effect, so homeowners need to budget for this on an ongoing basis. It is critical to take care of the smaller problems, such as water leaks, before they develop into bigger problems and put the value of your property at risk.
“It is easy to be swept away in the excitement of owning your first home, but you need to do your sums and don’t be tempted to load yourself with unnecessary debt,” says Madikizela.
This article “Don’t Let Unnecessary Expenses Sink Your First Home” was issued by FNB.