Plan to buy a first home


BUY­ING a home for the first time is never easy, but it is usu­ally quite pos­si­ble for those who are de­ter­mined to do so, says Richard Gray, CEO of Har­courts Real Es­tate.

“Most of the fi­nan­cial and eco­nomic fac­tors that prospec­tive buy­ers cite as ma­jor ob­sta­cles to home own­er­ship can be over­come,” he says, “given enough time. The trick is to make a plan of ac­tion and not give up.”

For ex­am­ple, it could take some months to clean up your credit record if you have a history of late pay­ments or any un­re­solved judg­ments for debt. How­ever, if you are se­ri­ous about buy­ing your own home, you will make a start right away by pay­ing your bills on time, sort­ing out the judg­ments and get­ting them off your record, and not ap­ply­ing for any more credit or in­cur­ring any new debts.

Then once you have done this, Gray says, you should make a se­ri­ous ef­fort to pay off or sig­nif­i­cantly re­duce any large ex­ist­ing debts such as a stu­dent loan, the out­stand­ing bal­ance on your car, your credit card or store card bal­ance. “The banks say a good rule-of-thumb for those get­ting ready to ap­ply for a home loan is to spend no more than about 35% of their gross monthly in­come on debt re­pay­ments, so that’s what you need to aim for.” The third thing stand­ing in the way of home own­er­ship for many prospec­tive buy­ers is the lack of a big enough de­posit. At the mo­ment, most lenders pre­fer first­time buy­ers to put down at least 10 to 12% of the home pur­chase price as a de­posit - and are will­ing to give those who do a bet­ter in­ter­est rate on their loans, he says.

“So although 100% loans are some­times avail­able, it ac­tu­ally ben­e­fits buy­ers quite sub­stan­tially to save up and pay as big a de­posit as they can. Cur­rently if you paida 10% de­posit on a R750 000 home, for ex­am­ple, and se­cured a rate re­duc­tion of just 0.5% as a re­sult, your monthly bond re­pay­ment would re­duce by about R900 a month and you would save more than R140 000 in in­ter­est over the life of the loan. If home own­er­ship is a pri­or­ity for you, it will be worth your while to cut back on spend­ing.”

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