Buying your first home is a momentous decision and one that requires considerable financial planning, says Mary Lindermann, operations executive at BetterBond. “This is why the forecast that the repo rate is likely to hold steady for a few months yet before coming down presents an ideal opportunity for buyers to plan ahead and budget properly before applying for a bond.” Although buying a home is a substantial investment, there are many options available to first-time buyers wanting to take the plunge.
First home finance
First-time buyers with a household income of between R3 501 and R22 000 may qualify for a once-off housing subsidy called First Home Finance, if they meet the criteria, says Lindermann. “It’s now possible to obtain the subsidy without first having been granted a bond, which makes it even easier for qualifying applicants to own a home.” You can use other sources of finance, such as an unsecured loan or employer-assisted housing scheme, to buy your home.
A helping hand from the bank
While it’s always advisable to put down a deposit – even if it’s only 10% of the home’s value – when applying for a bond, first-time buyers often don’t have the financial means to do so. “South Africa’s main banks offer a range of loan products that include loans of as much as 110% for young professionals under the age of 30,” says Lindermann. A loan of 100% or more makes it possible to buy a home without having a deposit. It could also cover the hefty transfer and bond registration fees that need to be paid upfront.
Below the threshold
Another way of making home ownership a reality is buying below the R1 million threshold. There are no transfer duties payable for homes of below R1 million – a considerable saving for a new buyer. First-time buyers should also consider a new development when looking for an investment. “No transfer duty costs are payable if your home is a new build, although you will still need to pay transfer costs to the conveyancing attorney.” Aside from the initial costs, buying in a new development will also save you money on repairs and maintenance for the first few years, adds Lindermann.
Buy smarter
As a home is a substantial purchase, it’s advisable for first-time buyers to know what they can afford before they start house hunting. “Obtain pre-approval from a bond originator so that you have a clear idea of what you can afford. Pre-approval also improves your chances of securing a bond,” says Lindermann. The approval rate for clients who pre-approved with BetterBond first is 90% of all applications submitted to banks on their behalf.
A bond originator will apply to more than one bank on your behalf to secure a lower interest rate – called a rate concession. Currently BetterBond’s average interest rate concession when applying to four banks is 0.61%, says Lindermann. This means that the interest payable on your bond will be 0.61% below what the bank would offer.
