If you’re like me, you probably weren’t taught much about how to do “real” adult things in school – like taxes, bonds and more. I learnt about buying property on-the-go as I purchased my first home, not knowing how anything works, but asking “silly” questions and making little mistakes.
From the paperwork to the deposit, here’s five tips to help you on your journey of buying your first home or investment property.
1. WORK OUT WHAT YOU CAN AFFORD
The first step to purchasing property is setting a budget for yourself. If you are taking a bond, it is best not to look at the price of the property as a whole, but rather the monthly instalment. You can use the calculator at the bottom of the property advertisement to see how much you will be paying every month.
PRO TIP: Your bond increases every time the repo rate increases and the amount is often significant. The Monetary Policy Committee (MPC) meets six times a year to set and discuss the repo rate. The current repo rate is set at 8.25% and has stayed the same for the last few months.
Once you have seen how much the cost of the property will be per month, you can then play around with the deposit amount to see what suits you. Of course, the higher your deposit, the less money you are borrowing from the bank. So, the less you will be paying every month.
Also, you may have the option of transferring the deposit into your attorney’s bank account. The attorneys will place your deposit into a high interest account and the interest will be returned to you after the property has been transferred into your name.
If you can afford to, you should consider putting in a deposit over the usual 10% so you will be paying less interest over the standard 20 years.
PRO TIP: Adding a little extra into your bond every month can bring the loan period down by years.
After factoring the monthly cost of the bond, you need to consider all the other monthly costs involved. If you are buying in an estate, flat, apartment or gated community, there are often levies you will need to pay each month. You will also be paying rates as well as water and electricity.
2. FACTOR IN ALL THE EXTRA COSTS
Buying property is much more complicated than just a deposit, bond and added monthly expenses. There are quite a few little costs you need to know about – and well no one really tells you.
You need to budget for transfer costs. The transfer costs are basically paid to the attorney to transfer the property from the seller’s name into yours and the transfer duty paid to SARS.
However, you do not need to pay transfer duty in South Africa if the purchase amount is under R1.1 million.
The transfer costs also include the deeds office fees and FICA fees among others. You also need to have cash on hand to pay as a deposit for getting the municipality bill transferred into your name.
Ooba Home Loans has an estimated transfer cost calculator that you can use here.
3. HOW DO YOU GET A BOND?
There are lots of free services that you can use to get your home loan. Your real estate agent should put you in contact with someone to assist. The person will basically do an application on your behalf to all banks, and you will then choose the one with the best interest rate.
PRO TIP: The better your credit score, the better the interest rate you will receive.
4. THE PAPERWORK YOU WILL NEED
There will be an affordability assessment in order to start the bond approval process. Here are some of the documents you will need.
- A copy of your ID
- Copy of your last six months pay slips
- Last three months bank statements
- You will also need to sign a Credit Check in order for the banks to check your credit history
5. MAKE AN OFFER
Lastly, all you need to do is make an offer on your dream property. While it is not in your control to know how much the seller will accept, you can still decide how much you are willing to pay and negotiate with the seller.
You are likely to get the best deals when it is a buyers market. A buyers market is when there are a significant number of homes to be sold but not enough qualified buyers to be able to purchase. Therefore, homes will take longer to be sold and the seller is likely to accept a reduction in their asking price.
Sometimes the seller has a few offers to consider and will take their best pick.
Do you have any more questions about buying your first property? Drop your questions in the comments section below.
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Love this article ❤️
Thank you!