Property investment 101
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Contemplating moving from your parents’ place to one of your own? Use these six tips to become a successful first-time homebuyer.
1. Start saving for a deposit
If your budget allows, saving for a deposit is a very good idea. It demonstrates that you’re invested in purchasing a home and gives you a better chance of getting your bond approved by the banks. You could be in line for a reduced interest rate if you’re able to put together a deposit, and best of all, a deposit means you would require a smaller loan and therefore pay a lot less interest over the term of your loan. Use our Deposit Savings Calculator to set your goals.
2. Save towards a deposit
If your budget allows, saving a deposit for a property purchase is one of the best moves you could make, says Coetzee. “It demonstrates to sellers and banks that you are a serious buyer, it brings down the amount to borrow, and it ultimately means you could get a better interest rate from the banks. Taken over a typical loan term of 20 years, even a small difference in interest rate could mean hundreds of thousands in savings, as the table below shows. On a R1 million bond, a 10% deposit at the current prime lending rate of 7% will save close to R200 000 over 20 years, and will shave almost R800 off your monthly bond payment.
| Purchase price | Deposit | Size of Loan | Interest rate example % | Monthly bond installment | Monthly saving when paying R100 000 deposit | Total bond amount | 20 Year saving when paying R100 000 deposit |
|---|---|---|---|---|---|---|---|
| R1 000 000 | R0 | R1 000 000 | 7% | R7 753 | R1 860 717 | ||
| R1 000 000 | R100 000 | R900 000 | 7% | R6 978 | R775 | R1 674 646 | R186 071 |
3. Get pre-approved
Getting pre-approved for a home loan makes sense in two significant ways. It gives you an accurate idea of how much you can afford, so that you can search in a realistic price range. And a BetterBond Verified Pre-approval Certificate, valid for three months, gives your Offer to Purchase an edge that other buyers likely won’t have. It shows sellers and estate agents you’re serious about buying, and it proves you can secure home finance. For an idea of your home loan affordability, let us pre-approve you for a home loan.
4. Choose your area
There are several things to think about when choosing where to live. How close is it to friends and family, how far are the shops, malls, gym, bars, restaurants and clubs that you like to go to? How long would it take to get to work, or could you work from home? What type of property would you like – flat, townhouse, freestanding home. Is the neighborhood as lively or laid-back as you like? Find out about crime in the areas you’re keen on – security is an important part of homeownership.
5. House-hunt
Before you start your house-hunt, decide what you’re looking for – size, outside area, security, parking, etc. Look online to see what is available. Set up alerts to get new listings on the various property portals and speak to estate agents who know the area. View different properties and at different times of the day to find the ones that suit your needs.
6. Make an offer
Once you find a place you love, the next step is putting in an Offer to Purchase (OTP). This is a very exciting part of homebuying, so do your homework to ensure your offer gets you the deal. You should clarify any questions you might have beforehand because an OTP is legally binding once you and the Seller have both signed. Remember that a BetterBond Pre-approval CertificateBetterBond Pre-approval Certificate could strengthen your OTP because it confirms the home loan you could qualify for. It gives both the Seller and Estate Agent the comfort that you can indeed commit to the amount you are offering and that you will be able to secure a bond.
If homebuying feels a little overwhelming, take a deep breath as you remind yourself that you’re on your way to owning your first home and securing your financial future. It will all be worth it!