Buying A House

Pros & Cons Of Property Co-Ownership

November 25, 2023 in Buying A House

With property prices and interest rates continuing to climb, it isn’t surprising that many first-time property buyers find difficulty entering the property market. This leaves many eager property investors looking for alternative ways to enter the property market, while many potential ‘would be’ first-time home owners continue to rent or share rent with a roommate.

Co-ownership of property is not a new idea. In fact, it is quite common with married couples, spouses or partners. However, more recently in world cities like New York, Berlin and London, there has been a substantial increase in the number of properties purchased between friends, siblings or family members, because it makes it more affordable and feasible to do so.

Today, there are a number of lenders that offer home loan deals or joint mortgages specifically for co-owners. As with any large investment, co-ownership isn’t without its drawbacks. A great deal of thought needs to go into an exit strategy for the worst case scenario.

Investing in property with friends or family members needs to be based on a relationship of mutual trust and honesty. It also requires careful consideration. Investors may want to also consider taking a life insurance policy to cover themselves. It is important to understand that with co-ownership, both investors will be held liable for the bond repayments at all times that the mortgage is in force.

Advantages of Property Co-Ownership

1. Property Affordability:

Many first-time investors may not qualify for a mortgage loan by themselves. With co-ownership, acquiring a home mortgage becomes much easier, as lenders would consider your total, combined incomes, living expenses, debts and credit scores.

2. Shared Monthly Expenses:

It is a great comfort to first-time home buyers, knowing that they are not alone in the investment. Peace of mind that the monthly bond repayments and household expenses are shared with someone else can really lift the burden.

3. Shared Investment:

Since both investors are eager to get into the property market, it often makes sense to co-own a property, especially if it’s your first real estate investment. Even if you decide to sell the property later on, your investment would have substantially increased, to serve as a deposit on your next investment.

Disadvantages of Co-Ownership Investing:

1. Fallout Between the Investors:

In life, fall outs and disagreements happen, especially when living together and if it happens, you need to have a strategy in place to handle it. Remember, either investor cannot just walk away or back out. Since both investors names are on the mortgage documents, you are both liable for the mortgage payments.

2. One Investor Decides to Sell:

it is important to plan an exit strategy before you enter the co-ownership purchase agreement. For whatever reason, the investor wanting to sell should first offer to sell their share of the investment to the other investor partner. In other words, it should be stipulated in the agreement that the investor partner always gets the first offer and the right of first refusal.

3. Risking Your Credit Score:

If any investor defaults in the mortgage payments, the lender is at liberty to report both investors to the credit agencies for non-payment and in the worst case, you could face possible foreclosure. Therefore both investors credit scores may be negatively affected going forward.

Co-ownership with a friend or family member can be a great and affordable way to enter the property market and own your own home together. All expenses of the investment are shared, including the deposit, transaction costs, mortgage re-payments and utility bills, making it a very attractive venture. However it is also important to carefully consider the risks involved.

Buying a home Should you follow your head or your heart?

April 5, 2018 in Buying A House

You’re buying a home, not dating it, so it’s important that logic rather than emotion influences your decision. Anna Marie doesn’t understand it, she recently bought a new home and although she ‘absolutely adored the place’ when she viewed it, it only took a few weeks for love to turn to hate.

“I wasn’t classified as a serious buyer by the agent’s I worked with, mainly because I made it very clear that I wasn’t in a rush and would only buy something if it spoke to me in the right tones. I must have visited 20 homes and spent a couple of weekends visiting the odd show house and nothing piqued my interest. I wasn’t particularly bothered by any of this, like I said, I wasn’t in a rush to buy and found the whole house hunting process very interesting. I like to think of myself as an extremely sensible person, someone who weighs up all the aspects of any situation before diving in, so I never considered the fact that I might let my heart rule my head, but that’s exactly what happened.

“I love bay windows and cottage pane window frames and got very excited when I realized the home I was viewing had both. If I’m honest with myself, I’d basically made up my mind that I had to have this house before I walked through the door, but it was the furnishings that really clinched the deal. I just knew that this was the one, which given the fact that the home wasn’t being sold fully furnished was probably my first, but not my only, mistake. I signed an offer an hour later and was literally walking on air when I heard the owner had accepted.

“Things started to go awry on the day I moved in. Opening the door and seeing the empty shell of the home was a real eye opener. The kitchen was smaller than I remembered and the bathrooms were minute, but that wasn’t my biggest concern, what worried me the most was that I simply didn’t like the house. I initially put things down to stress and sheer exhaustion, but two weeks later, I finally came to the realization that I’d made a mammoth mistake.”

We all experience buyers remorse at some point in our lives, but buying a house isn’t the same as buying a pair of shoes…you can’t return the item and ask for your money back.

A struggle between the heart and head is common among home buyers. The challenge is to find something that’s the perfect balance between what’s a passing fad and an enduring feature. Don’t get us wrong, emotion is and always will play some role in the home-buying process, but a buying decision shouldn’t be made on emotion alone, any more than it should solely be based on logic.

Indeed, balance is key when buying a home. Choosing a home using a combination of both emotion and logic generally ends well. According to experts, the pros of emotional buying include:

  • Creating memories. This is a biggie. Most of us harbor good memories about our childhood home and it’s understandable that we want to recreate the same for our own families. Emotion allows us to picture ourselves living in the home and sharing special moments with family and friends. For this reason, it’s important to find something that feels right mainly because those who are happy in a home will usually live in it for a longer period.
  • Practicality. While it’s strange to think that emotional buyers can exercise logic, there are aspects of an emotional buyer that are extremely practical. Emotional buyers tend to imagine themselves living in the home and are therefore practical when it comes to the layout and overall design of the property. Interestingly, too much logic can undermine this factor because too much attention is given to the minor details of the home, which could undermine the positives of the home.

When Buying a Home – The Cons of being an Emotional Buyer include:

  • Impulsive buys. The biggest downside to being an emotional buyer is the tendency to make impulsive decisions. Hearing things like there are multiple offers pending or just the fact that there is a great deal of interest in the property will often cause panic and push an emotional buyer into making a decision. In these instances, there’s a real danger that a buyer who only works with emotion will make a higher offer before they have logically ascertained that the home is actually what they want or need.
  • Sweating the small stuff. Overlooking a home simply because you don’t like the color it’s painted or the style of the kitchen cabinets is generally going to mean that you are going to be house hunting for a very long time. Very few, if any, properties are going to be the perfect match. Learn to overlook the things you can change and focus on things you won’t be able to rectify without spending a large sum of money.Remember, there’s a big difference between emotions and instinct. Going with your instincts means that the property ‘feels’ right, is well priced and overall is exactly what you and your family need. Basing a buying decision purely on emotion means that you’re probably more taken with how the house looks and in Annemarie’s case, the windows and furnishings than you are about the practicalities of the home, which could backfire.

As with all things property, a rational, cool approach is going to win the day so put your emotions on the back burner and allow the logical side of your brain to take over most of the thinking.

Source: https://bit.ly/2HbKCvP

Good news for home buyers: historic debt ruling declared invalid

November 14, 2016 in Buying A House

The Gauteng High Court has ruled that new homeowners cannot be held liable for the ‘historic debt’ owed to municipalities by previous owners.

This comes as welcome news since the market was thrown a curve-ball towards the end of January this year when the Supreme Court of Appeal ruled that new owners could be held responsible for municipal debt – rates, water and electricity – dating back 30 years.

The ruling was made in terms section 118 of the Local Government Municipal Systems Act in order to obtain a clearance certificate. “We expected that this ruling would be challenged as it was not only blatantly prohibitive, but also unfair to new buyers,” says Bruce Swain, MD of Leapfrog Property Group. “We’re delighted to see that the ruling has been declared invalid.” Judge Dawie Fourie queried why a municipality was entitled to “visit the sins of a predecessor in title upon innocent third parties when there is no relationship or connection between that party and the debts in question”, and declared the section of the Act constitutionally invalid. Swain says the judge has ordered that the Tshwane and Ekurhuleni metros render municipal services where no debt exists in respect of municipal services between the municipalities and the new owners. The municipalities were also restrained from claiming payment of outstanding amounts from new owners where they have no debt relationship with the municipality concerned in respect of municipal rates, taxes and charges, he says. “Local municipalities do have legal recourse to deal with arrears, and expecting new owners to pay a previous owner’s debt is simply ludicrous,” says Swain. “Hopefully this judgment will not only offer a lifeline to new homeowners saddled with debt that’s not their own, but will encourage prospective buyers to purchase, safe in the knowledge that they won’t suddenly be hit with massive historic debts.”

Source: https://www.property24.com/articles/good-news-for-home-buyers-historic-debt-ruling-declared-invalid/25019

How you can avoid buyer’s remorse

August 25, 2016 in Buying A House

You’ve probably bought something and later realized that it wasn’t exactly what you needed or even liked. In those cases, it’s easy to return or exchange– even if the item is as big as a new appliance or as pricey as a designer handbag.

Couple looking at a homeBut unlike store merchandise or a car, you can’t ‘try before you buy’ a home, which makes your decision to buy or not buy even more stressful. Not only is a home the largest investment you’ll probably ever make, it’s also where you’ll lay your head at night, spend years of your life, and make memories.

We’ve entered a busier real estate market, with competitive bidding and limited inventory. In the hype of the hot new listing, and knowing there are other buyers zeroing in on the same property, you might feel compelled to go the extra mile to “win” the home. And then, it’s quite possible that, within hours or days of getting into contract, you may start to feel buyer’s remorse. Once you’ve had some time to ‘cool off,’ you realize the home may not be the best one for you or that there are issues you overlooked previously. You want to pull out of the contract.

How do you avoid buyer’s remorse? Throughout the home buying process, stay grounded by asking yourself the following questions.

Must ‘own’ this house or must ‘win’ this house?

Often, in a competitive situation, a buyer just wants to “win.” If you’re competing and forced into a multiple counter-offer situation, step back and ask yourself: Is this the home I really want or do I just want to beat out the other buyers?

Also, has the potential purchase price exceeded the list price? Putting an offer on a home at $425K is one thing. But a few rounds of counter offers may bring the price up to $500K. This can create a completely different set of circumstances, and the home may no longer be right for you.

Recommended by Forbes

Have I seen the home more than once?

There are hundreds of buyers who, through the years, saw a place only once. There are even savvy international buyers who buy places in New York City sight unseen. But this is the exception, not the norm. No matter how much you think you love the home, if you’ve only seen it once, you could be heading for buyer’s remorse. Going back in the evening or a different time of days provides another perspective. Also, you may see things differently the second time around. Often, you miss something in your first pass that stands out the second time around.

Have I walked through every room?

A quick tour of the home provides a basic understanding of the floor plan, condition and size. But to really know a home, dig deep. Walk to the end of the lot and look at the back of the home. Open every closet and go in the attic, basement, and garage. Look at the neighboring houses, too, and try your car in the garage.

Have I seen a floor plan (if available)?

Seeing an architectural floor plan provides an opportunity to see the home in a different context. It’s possible you’ll pick up on things you might have otherwise missed.

Have I reviewed the photos after seeing the home?

Going back to the listing photos helps jog your memory. Seeing the photos, which are snapshots in time, will give you a different perspective. Was the shade closed in the photo and if so, why? Did you ever look out that window? Does the photo remind you that the bedrooms are small because there are only twin or queen-sized beds without any nightstands? These types of questions are a great way to evaluate if a home will work for you.

Have I toured the home privately?

Visiting a home with hordes of other buyers isn’t the best way to see it. You may feel cramped or rushed. You might want to sit in one of the rooms in silence for a few minutes, but it’s often not possible during an open house. There may be questions you or your agent would like to ask the listing agent, but don’t want everyone to hear. Or you just would want the time and attention of the listing agent. If you’re serious about a home, go back for a private showing. A lot more is revealed when you have time alone in the property.

Have I read the seller’s disclosures?

If you haven’t seen or heard about any disclosures before making an offer, it could be a red flag. In many markets, disclosure packages are available prior to making an offer. If not, a good listing agent will reveal the major disclosure items verbally. Ask if any disclosures are available and read them thoroughly before making an offer. If you’re too busy to review the disclosures, you shouldn’t make an offer. Also, find out if there are inspection, termite, or other reports you haven’t seen yet.

Is this home what I set out to look for in the first place?

Many times your path changes once you’re in the market. You may realize that another neighborhood will give you more for your money. Or the home that’s in the school district you want needs a lot of renovation, which you hadn’t counted on doing. You may discover that with lower rates and being open to a new or emerging neighborhood, you could afford a single-family home and not have to settle for a condo.

When buyers are in the throes of a competitive home market, it’s easy to settle on a home that “kind of” works, or to lapse into autopilot mode. You may just be ready to buy and be done with it. You don’t think about things like the commute from the new neighborhood to your job, that you aren’t the renovating type, or that you never signed up for lawn mowing and maintenance issues associated with a single-family home.

A good agent will bring you back to your original plan before you sign a contract. You and your agent should review all the reasons why the home isn’t the right option. It’s better to flesh that out in advance than to ignore the warning signs and cancel.

To help protect you from buyer’s remorse, always have an inspection contingency in your purchase agreement. An inspection contingency should be reserved for something serious about the property you didn’t know before making your offer. However, some agents call it the “cold feet” or “buyer’s remorse” contingency. It allows you to exit the agreement should something come up.

If you think you’ve found the home of your dreams but have the littlest doubt, or you can’t answer all of the above questions, think twice about accepting that final counter or even writing the offer to begin with. Ultimately, never sign an agreement if you aren’t completely convinced this is the home for you.

Source: http://www.forbes.com

Who Pays for What During a Property Transaction?

December 22, 2015 in Buying A House

Property TransactionBoth sellers and buyers have certain responsibilities and obligations that they need to address during a property transaction before the property can change ownership.

If either the buyer or seller is not sure of what they are required to pay, they should consult with a real estate professional or property attorney who can provide them with further guidance.

It is for this reason that both parties need to prepare financially before either selling or buying a home.

Below are some of the costs involved in a property transaction and who is responsible for each of these:

The buyer

It is fairly common for a buyer to require a percentage of the purchase price of the home as a deposit, however this is not the only cost that buyer will need to prepare for. A buyer will also need to factor in financial aspects such as the transfer fees and the bond costs if registering a bond with a finance provider.

When a property is bought and transferred into the buyer’s name, the South African Government levies a tax on that property transaction based on the value of the property. If purchasing a vacant stand, the transfer duty is based on the value of the land. However, transfer duty on an existing home will be based on the value of the land and building.

Property Transaction 1As of 1 March 2015, properties valued below R750 000 are exempt from paying transfer duty. Transfer duty on homes bought for more than R750 000 is charged on a sliding scale percentage relative to the property’s value. For example, a property valued at R3 million will pay R85 000 plus 11% of the amount above R2.25 million.

The transfer duty is payable to the conveyancing attorneys approximately one month before transfer, so buyers will need to have the money saved up before they start looking at homes.

In a case where the property has been purchased from a developer who is registered for VAT, VAT is charged by the seller on the purchase price and paid over to SARS.

In such cases the purchase price of the property could either be expressed as VAT inclusive or VAT exclusive, so the buyer must take care to note carefully whether the purchase price as recorded in the written agreement of sale excludes or includes VAT.

If a buyer has bought the property with the intention to renovate or subdivide the property, they might be required to pay for a conveyancer’s certificate regarding certain title restrictions that may be relevant to that particular property.

This certificate will generally cost in the region of R2 500 plus VAT. In addition to this, the buyer may also be required to pay for the approved plans of the property. Even if the seller may have drawn up plans for the renovation and the offer to purchase may stipulate their inclusion, the seller is not legally bound to provide the buyers with the approved plans, unless expressly stated in the agreement.

Another cost that the buyer may need to consider is occupational rent. Although this is largely determined by the agreement between the two parties, when transfer is due and the date on which it is agreed the buyer can move into the property.

The occupational rent amount is predetermined beforehand and stipulated in the offer to purchase. The stipulated amount should be based on fair-market value.

The seller

The seller will be responsible for paying the agent’s commission, along with obtaining all clearance certificates for the property.

These would include an Electrical Certificate of Compliance (ECOC), which must not be older than two years and must cover all electrical installations during this time. It is important to note that, where applicable, electric fences are covered under a separate certificate.

Other clearance certificates include a water and plumbing certificate, gas certificate and beetle certificate, if applicable. If no repairs are required, the cost of obtaining all the certificates will be in the region of approximately R2 500, depending on the service providers used.

Property Transaction 2If a buyer has bought the property with the intention to renovate or subdivide the property, they might be required to pay for a conveyancer’s certificate regarding certain title restrictions that may be relevant to that particular property.

While it is very much dependent on the agreement of sale between the two parties, repairs that need to be completed around the home will also be for the seller’s account.

The seller will be responsible for paying the bond cancellation fee, which is payable directly to the bond cancellation attorney and is applicable even if the bond is at a nil balance.

The seller will be required to provide the holder of their bond with three months’ written notice in order to cancel the bond. If this is not done, the seller is generally required by the bondholder to pay a bond penalty interest, which will equate to approximately one month’s bond repayment for every month of notice not given.

As a general rule, sellers will have to pay a four month advance on their rates and services, as well as any arrears owing on any levies or their homeowners’ association fees, and may also be asked to pay these in advance, up to the anticipated date of transfer.

If either the buyer or seller is not sure of what they are required to pay, they should consult with a real estate professional or property attorney who can provide them with further guidance.

Financial preparation will ensure that the property sale process runs smoothly and that there are no monetary surprises on either side of the sale.

Source: www.property24.com

5 property buying tips: leave no room for regret

September 2, 2015 in Buying A House

You can return most things you buy if you discover that they don’t fit or don’t work, but if you buy the wrong home, the chances are that you’ll be stuck with it for several years, or have to pay quite a price to correct your mistake.

You really shouldn’t buy the first house you see, or at least not until you have had time to think about it and compare it to several others. You need to feel sure that the home you’re buying is good value and will meet your needs at this time of your life.

However, there are some tried-and-tested preventatives for what is known in the real estate industry as “buyer’s remorse”, and it is worth running through these before you go house-hunting.

A recent study in the UK revealed that about one new buyer in 10 regrets their choice to some degree, with the most common cause of their dissatisfaction being the feeling that they could perhaps have got a better deal if they had taken more time to choose.

Getting caught up in a bidding war early on in your home search can also lead to you making emotional decisions that you may regret later.

Other reasons that buyers may suffer remorse include not liking the new neighbours, finding that their new home is too small, finding that their new home requires more work than they expected and finding that their bond payments put them under financial strain.

With this in mind, here are 5 tips for prospective buyers:

1. Consider your needs now and later

Think very carefully about what you need from a property, and may need five or 10 years from now.

For example, a large garden might appeal to you, but will you really have the time, or money, to maintain it?

On the other hand, we find that people who are downsizing are also liable to underestimate the amount of space they will need, such as an extra bedroom to use as a home office or to accommodate family visitors.

2. Carefully consider your finances

Double-check your finances to make sure you can comfortably afford the home loan payment and the other on-going costs of homeownership, such as insurance, rates and maintenance, etc.

Be sure to create a contingency fund so that an unexpected repair or interest rate increase won’t send you into a tailspin.

3. Research the neighbourhood

Research the area in which you are thinking of buying. Picking the wrong location can have a negative effect on the future resale value of your property as well as your current lifestyle.

Look out for positives such as good schools, public transport, medical facilities and clean parks, and for negatives such as nearby road-building or large commercial developments.

4. Visit your potential new home at different times

Visit the home you are thinking of buying at different times of the day and on different days of the week.

In this way, you may well discover noisy neighbours before you move in next to them, or a noisy local gathering place that only gets busy after dark.

In addition, you may find that traffic in the area is worse than you thought, or that the commute to work is actually further or more difficult than you estimated.

5. Stay focused on your priorities

Don’t let a lovely entertainment area blind you to a floor plan that won’t suit you.

Try to find the home that most closely matches your original wish list and is within your budget. It is not worth buying a home you can’t afford, as it will very likely prevent you from reaching other financial goals.

Source: www.property24.com

Top challenges and tips for South Africans buying property

August 6, 2015 in Buying A House

For South Africans thinking about buying property, affordability is still the number one concern. This topped property size, location and other factors such as security and lifestyle.

According to the report, more than a third of house hunters (35%) in SA have to reassess their needs once they start searching for a property and looking at their chosen suburbs. Of these, 37% said affordability was their top concern, followed by property size (29%) and location (10%).

These were some of the key findings in Absa’s recently launched The Homeowner Insights report, which offers a unique perspective on the home-buying journey and what consumers in South Africa typically experience, as well as the difficulties they face.

Buying a home is likely to be one of the biggest long-term investments most people will ever make, says Carel Grönum, Managing Executive of Absa Home Loans, and there are risks and rewards that each individual has to weigh up in making their own decision.

According to the report, more than a third of house hunters (35%) in SA have to reassess their needs once they start searching for a property and looking at their chosen suburbs. Of these, 37% said affordability was their top concern, followed by property size (29%) and location (10%).

Despite the general concern with safety and security that influences our daily lives, only 3% changed their decision based on how secure the home was, with the same figure for pet-friendly reasons and building aesthetics. At the bottom of the list, only 1% said lifestyle was the factor that made them reassess their needs.

“A total of 1 209 individuals took part in the first Homeowner Insights survey, which was conducted during May this year, representing a well-balanced and even spread across race, gender, age and personal income criteria,” says Dr Henk Pretorius, CEO and co-founder of digital market research company Columinate. “The survey focused on individuals who are decision-makers when it comes to household matters and the sample included tenants of rental properties, established and new homeowners, individuals intending to purchase a home within the next 5 years and investors who buy properties as investments.”

He says 32% claimed to be the sole decision maker, 58% were current homeowners and 10% of these were investors, with 42% in the aspirational homeowner group. The survey looked at six life stages, from singles to families and mature individuals, with 26-50 years being the predominant ages.

When deciding to buy or rent, the survey showed the most stressful part of buying a home was whether the bank would approve the home loan, outranking the number of bedrooms, size and property location.

While 87% of the survey respondents were confident they could afford their newly approved home loan instalments at the time of searching for a property, only 38% of home loan applications are being approved by Absa.

“This ‘disconnect’ suggests that there is much more to assessing affordability than meets the eye,” says Grönum, and the disparity between the customers’ understanding of their financial situation and how banks view things, creates a lot of anxiety for aspiring home buyers.

“While credit records and conduct of accounts play a key role when assessing home loan applications, affordability accounts for a large portion (22%) of customers’ home loan applications being declined. In cases where applicants have healthy credit records and good financial conduct, some simply cannot afford the monthly instalment based on the bank’s affordability assessment,” notes the report.

The main reasons why only two out of five consumer home loan applications are approved by Absa are firstly, an impaired credit record (35%), and secondly, consumers don’t always understand their own personal financial situation, says Grönum.

In terms of affordability influencing the decision to rent, 26% indicated the predictability of a monthly rental was their reason to rent and 19% said it allowed them to afford a better property in a preferred suburb.

Grönum says they identified a need to become more “customer-centric” and translate the home-buying journey into “bite-sized chips” to help consumers prepare and better understand the process they are embarking on. “The Homeowner App is a digital tool that guides consumers through the home-buying journey, with other ways to engage like loyalty bond rewards and YouTube videos.”

Before the National Credit Act (NCA) of 2007, repayment-to-income was a popular tool that credit providers used to get an understanding of a customer’s affordability.

A figure of 30% of a person’s income was commonly taken to calculate the maximum amount an applicant could qualify for, but the report says it does not consider other credit commitments or monthly expenditure, which could differ from buyer to buyer. “Now the new Credit Act requires an understanding of a customer’s income and adds a detailed analysis of other credit commitments and living expenses. The result of this calculation is a net disposable income, which could be used to determine affordability.”

Affordability is a complex subject that poses significant challenges to the pre-buying and searching phases of the homeowner journey, say Grönum.

Although the concept of affordability is seemingly easily understood, the report highlights that it is often poorly understood and “leads to anxiety as well as inefficiency in the pre-buying and property searching phases” – potentially placing the consumer’s financial wellbeing at risk. “Often, aspiring buyers apply for home loans without fully understanding or disclosing financial commitments, and without grasping the full impact that the monthly instalments and running costs could potentially have on their financial welfare.”

“People spend a lot of time searching for property, only to realise they do not qualify for the home loan or the full amount they need,” says Grönum. This also has the effect of wasting the seller’s and estate agent’s time, making the sales process less efficient.

He says using online bond and affordability calculators can help would-be buyers understand what they can afford, and what the upfront costs, such as transfer and initiation fees will be.

Absa has 5 tips for aspiring homeowners:

Grönum says it’s best to get a good understanding of your circumstances during the pre-buying phase:

  1. Buy within your means – if your income fluctuates, be realistic about what you can afford, and especially consider those months when your income will be lower.
  2. Have a detailed budget, review your bank statements and add up all your expenses – consider expenses, big and small, and don’t forget those due annually or quarterly.
  3. Always be realistic, open and honest – not being able to afford your home loan instalment has much worse consequences.
  4. Use available tools and get expert advice – use online digital tools and talk to a home loans consultant, private banker or mortgage origination consultant.
  5. Consider the impact of an interest rate hike on your monthly instalment – if you are not comfortable with fluctuating interest rates, you could opt for a fixed rate option.

Source: www.property24.com

Pros and cons of buying a property for cash

August 6, 2015 in Buying A House

Even if you have enough cash in the bank to be able to buy your next home outright, it might be quite a risky move to do so.

Buying a home for cash will most likely mean that all the money you currently have, or at least a large percentage of it, will be tied up in one asset, leaving you little for other investments, savings or emergencies.

You need to carefully weigh up the pros and cons of doing this.

Often home buyers find that applying for a home loan is a better course to follow, especially if they enlist the help of a professional mortgage originator to simplify and speed up the application process.

Here is a list of pros and cons of buying a property cash:

Pros

  • You will save money by not paying interest on a home loan for 20 years. This may seem like an especially attractive proposition if you can then invest any of the money you would have been paying in a tax free account.
  • You will avoid having to worry about being approved for a loan, as well as paying the bond registration costs.
  • Your credit record will also not come into question, which could be a factor if you have had some money trouble in the past that you think might prevent you from being able to secure a loan.
  • You will have 100% equity in your home, which you should theoretically be able to access if you need money for an emergency, and you may find personal satisfaction in owning your home “outright”.
  • You will be an attractive buyer to serious sellers, and the prospect of being able to conclude a faster, simpler deal may even enable you to negotiate a better price.

Cons

  • Buying a home for cash will most likely mean that all the money you currently have, or at least a large percentage of it, will be tied up in one asset, leaving you little for other investments or savings or emergencies.
  • If you only want to invest in property, you should seriously consider spreading your risk by using your cash to put down deposits on two or more homes and obtaining a loan for the remainder of the purchase price in each case. There could also be tax benefits in owning one or more rental properties, as well as the possibility of better returns on your capital.
  • You will have no gearing protection. If all your money is in your home and property prices drop, you will take that percentage drop on the whole amount you paid. For example, if the purchase price was R1 million and the market drops by 10%, you will have lost R100 000. But if you only paid a R100 000 deposit in cash and the market drops 10%, your loss will be R10 000, with the bank taking the loss on the remainder.
  • Property can take weeks or months to sell, which can be a problem if you need money quickly. Even trying to raise a home loan against your paid-for property can take too long if you have a real emergency.
  • You receive no bank valuation. When you apply for a home loan, the bank will usually send a valuator to see that there is sufficient value in the property to justify the purchase price. This will not happen if you buy for cash, so you will have no “third party” confirmation that you are not overpaying.

Obviously, how you pay for your home is a personal decision, but you should not decide to do away with a mortgage and part with a large amount of cash on the spur of the moment.

You should seek professional help to make a proper assessment of your overall financial situation and long-term investment plans.

Source: www.property24.com

Don’t over-extend yourself when buying a home

July 28, 2015 in Buying A House

It’s an exciting time. You’ve been awarded a bond and have taken ownership of your first home. As you begin to settle in, your thoughts stray to how much nicer it would look with a new set of elegant curtains, new tiles or a luxurious new lounge suite.

As exciting a time as it may be, it’s vital not to over-extend yourself on additional items you think are ‘necessary’ to complement your new home as doing so could ultimately put you at risk of losing your dream home.

Commenting on the matter, Dr Simphiwe Madikizela, head of projects at FNB Housing Finance says:

“While 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.”

Some of the expenses new home owners have to contend with include water, lights and municipal rates. Although you can control your water and light usage to a degree, municipal taxes, which vary according to the size of your property, are fixed.

Other new costs include levies (if you have bought a sectional title property) and building insurance which is mandatory if you have a bond. Although not obligatory, home contents insurance is another cost most new homeowners inevitably end up adding to their budgets.

Another cost that new homeowners don’t always factor in is maintenance and upkeep which applies to new houses too. It is critical that although seemingly insignificant, even the smallest problem must be attended to as it can quickly develop into a bigger problem and put your property at risk.

Says Madikizela: “First time home owners are not always aware of the additional cost pressures that come with home ownership. One of the most common mistakes we find is that new home owners, in their excitement, acquire unnecessary and dangerous amounts of debt buying furniture on account.”

Although tempting to give in to the need for instant gratification (and bragging rights) it’s important to steer away from such behaviour.

Adds Madikizela: “What you may not realise is that furniture accounts can lock you in for 12 to 24 months before you are able to pay them off. This adds a great amount of unnecessary pressure to your budget and could put you at risk of defaulting on the more important costs such as your bond.”

So, before you go out on a shopping spree and acquire an expensive lounge suite or the latest flat screen TV, think carefully and honestly and define whether or not you ‘need’ something or ‘want’ something. If you think you really need something, look carefully at your costs and see if you can afford it outright. If not, try to avoid miring yourself (and possibly your family) in debt by borrowing items temporarily or asking family members and friends to donate old furniture and appliances.

Notes Madikizela: “There are a number of costs that are unavoidable and it is necessary to budget for them over and above your bond repayments. 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. While it is easy to be swept away in the excitement of owning your first home, do your sums and don’t be tempted to load yourself with unnecessary debt.”

Source: www.privateproperty.co.za

Know the right questions, when buying a home

July 8, 2015 in Buying A House

Take the headache out of home buying – know what questions to ask

Whether buying your dream home or a fancy new set of wheels, doing your homework upfront and knowing what questions to ask is essential in preventing any surprises down the line. ooba, South Africa’s biggest bond originator, has been finding the money for home owners for over 15 years and is well placed to offer expert advice on how to take the headache out of home buying.

Assess your Affordability

The question of affordability is an obvious one and very important to bear in mind from the beginning. In addition to thinking about the deposit, you need to also consider the monthly bond repayments and whether you will be able to afford to keep your property in a good condition. A good place to start is to get prequalified; this will give you an idea of what you can afford. Before signing off on the property, do a spot check to ensure that, should you need to do renovations, this has at least been accounted for in the asking price.

Ensure that the location suits your lifestyle

Location is crucial in ensuring that your home fits the lifestyle you lead. It is important to consider the following factors when thinking about the area you are buying in: what is the distance from home to work, is the property in a developing area where you see the resale value increasing at a considerable pace and lastly, is the neighbourhood safe?

Gather a history of the property and area

Do some research on the property and area; find out how long the property has been on the market and how long the current owners have been living there. If it’s possible, speak directly to the owners to find out why they are moving, just to make sure there is nothing wrong with the property. Also approach neighbours to get an idea of what their experience of the area has been. All this information should answer the question: is the property a worthy investment?

Get certified

Ensure that all your compliance certificates have been issued by an authorised independent contractor; these include the electricity, plumbing, gas if there is gas on the property and extra’s such as the electric fence certificate. The last thing you want is a nasty surprise with regards to compliance issues once you have moved in.

Source: Private Property (www.privateproperty.co.za)