Worth wait­ing to save de­posit

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Home buy­ers may com­plain about hav­ing to save up de­posits of 10% or even 20%, but they’ll prob­a­bly be glad they did af­ter next year when in­ter­est rates and home loan re­pay­ments may in­crease.

“The strong rand is help­ing to keep in­fla­tion and in­ter­est rates down at the moment,” says Har­courts Africa CEO Richard Gray, “but this sit­u­a­tion could change within a few months and then those who kept their bond re­pay­ments down by pay­ing a de­posit will be pleased they did.”

In ad­di­tion, he says, home buy­ers need to con­sider that the costs of run­ning a home are ris­ing all the time, with elec­tric­ity charges, for ex­am­ple, set for an­other hike next year.

“Sav­ing for a de­posit rather than fi­nanc­ing 100% of your home pur­chase could be a bud­get life-saver in fu­ture.”

Ide­ally, he says, home buy­ers should try to have a full 20% of the home’s price as a de­posit.

“With the na­tional av­er­age home price now above R800 000 this is ob­vi­ously a lot of money. How­ever, when the de­ter­mi­na­tion to save wa­vers buy­ers should bear in mind the likely ben­e­fits, es­pe­cially that they will be putting them­selves in a strong po­si­tion to ne­go­ti­ate a be­low-prime in­ter­est rate, be­cause len­ders will con­sider such buy­ers to present a lower risk fac­tor. At the same time, len­ders have found that home buy­ers that put down a full 20% are much less likely to de­fault on their loans.

“A lower in­ter­est rate on your loan would make your monthly re­pay­ments more af­ford­able and also add up to great sav­ings over the course of the loan,” he says.

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