My house is my palace
We all dream about our own house - how to make it happen.
You have been dreaming of owning your own property for years. A place where you can make the rules, paint the walls, have friends and family over and feel a sense of security and accomplishment. A house is probably the most expensive item you will ever buy therefore it is very important to do your research. You will be paying your home loan for years to come so make the right decisions now!
1. Get your finances in order before you apply for a bond.
It is most likely that you will have to finance your house with a bond. The two most important factors will be affordability (how much can you afford) and your credit record. Take the following steps to get your finances in order before you apply for a bond:
- Make sure you are not blacklisted and that all your debts are up to date.
- Reduce your debt as much as you can.
- Start saving for a deposit.
It is important that you keep your finances in order. The last thing you want is for your house to be repossessed because you can’t make the bond repayments.
2. What size bond do you qualify for?
Your bond is based on your debt-to-income ratio. The amount you qualify for is seldom more than 30% of your gross (before tax and deductions) monthly income.
All your expenses are also taken into account to see if you can afford a bond or not. If too much of your current income goes towards paying off debt or if the bank believes that you are a high credit risk, you will struggle to qualify for a bond.
The online bond calculator can give you an idea of how much you qualify for but your expenses and credit rating will still be taken into account by the actual bond originator.
3. What else do you need to keep in mind?
Negotiate as much as you can. You will be paying interest on the bond for 10, 20 or 30 years so try and get the best interest rate possible. A lower interest rate will save you a lot of money over the repayment period.
Always try and pay as much extra into your bond as you can. An extra R500 per month will mean that you reduce the bond repayment period as well as the interest amount.
The bigger your deposit the better. Have at least 10% of your bond amount saved as a deposit. Try saving the same amount per month as what your bond repayment will be. This will help you to see if you can really afford a house and once you have to start paying the actual bind your will already be used to that amount going off per month.
Carefully consider what you can really afford even if you qualify for a higher bond. Will you still be able to pay the bond if the interest rates rise? Will you have enough money to maintain your lifestyle and the house?
Don’t let yourself feel pressurised. Get as much information as you can and make the right decision for you. After all, you are the one who is going to pay back the loan!
Finding the right house and qualifying for a bond are just two pieces in the puzzle. You will also be liable for the following fees and costs:
- Bond initiation and administration costs
- Legal costs. VAT/Transfer duty. Bond registration
- Deposits for utilities like electricity and water
- Home owner’s insurance
- Rates and taxes