‘Big picture’ budget a must

Besides a bond, as a home buyer, you also need to budget for ongoing property ownership costs.

For example, once you take occupation, you will be liable to pay for services like water and electricity and – once the property is transferred into your name – you will have to pay municipal rates.

Before committing to a property purchase, find out what the seller was paying for municipal services and rates for the past year, and build this into your monthly budget.

Budget a monthly amount to maintain your home and garden. Keeping the property in a reasonable state of repair is a condition of most home loan agreements.

There can also be substantial insurance costs. Financial institutions usually insist, for example, that the property is insured at replacement value (homeowners’ insurance).

Most buyers allow the premium to be debited yearly to their bond account. However, paying it separately when it’s due can save thousands on the eventual purchase price of a home. Consider setting aside a monthly amount towards this.

Your lender may also insist that you take out life insurance to cover the balance owing on your bond, in the event of death or permanent disability (bond insurance).

Finally, it’s advisable to have short-term insurance that covers you for home contents lost due to disaster or crime. Many people also pay monthly for a security company’s services or a neighbourhood watch programme.

These additional home ownership costs can amount to almost as much as your monthly bond repayment. Buying a less expensive home is a lot less difficult than losing a more expensive one – and one’s credit rating – for the lack of proper budgeting at the time of purchase. Rudi Botha is chief executive officer of BetterBond