How to buy a house
BANKS have started issuing out 5-25 year mortgage bond, which is a long term loan. Remember these are loans (debt) that require careful planning. Building via mortgage It could be a cost effective way of doing it if you could handle the emotional and` treacherous way of going through builders, build materials management and monitoring. It also affords an opportunity to build your own specific home. A new home has a long life span. Just get a good contractor who knows what they are doing as it could be a lifetime regret if they mess things up.
Cash purchase Save and build gradually. If you live outside the country make sure you get very trusted lieutenants to do it on your behalf to avoid surprises. With hard cash you just need to make sure you buy what your heart desires as it is not every other day you change houses. Make sure you have extra funds to all the costs to the house including any renovations thereafter. The purchase must not compromise your financial well being after the acquisition. For SMEs make sure the acquisition doesn’t affect business performance through drawings personal or otherwise.
Credit worthiness There is needed to look at your other debt track records. The bank would have to clear you of any other debts before this one. An adverse track record will jeopardise your chances of getting a loan. Any outstanding none servicing of debts need to be cleared. These records are crucial in obtaining mortgage so be warned to manage your debts well as they may come back to haunt you. Check with credit bureau how your record stands and remedy it prior to visiting your bank official. Start building a clean record right now and start servicing your debts and doing well any other financial judgments against you.
Annual income Your gross income determines how much you are entitled to in terms of the mortgage loan. Include all other incomes that come from other sources other than your 8-5pm job. The higher the income the higher the loan you would be entitled to and suffice to say the higher the monthly repayment obligations as well.
Financial worth The bank will be interested in knowing your balance sheet. In general it gives them comfort as to the individual that they are lending to. It aides the affordability and risk mitigating measures that could be implemented in case of emergencies.
Affordability Your bank will also consider your re payment interest, taxes, insurance bond charges to calculate whether you can afford. All these must leave you in a comfortable financial position after having settled all your monthly financial obligations. Get a loan that is within your means due to the long term commitments that you would need to embark on. Initial deposit
You need to raise the initial deposit, which ranges from 10-30 percent of the property purchase price. Raise the initial deposit sum through savings and not borrowings.
If possible negotiate for zero deposit but that will increase your monthly repayments. Debt status /Debt-to-income ratio all your total monthly debts as a ratio against total monthly income determines your ability to service your debts without a strain. A comfortable ratio of 25 percent is ideal otherwise above that is a precarious position. Transfer fees, bond fees and lawyer costs Take note of the other fees that come with the mortgage so that you complete the transaction. Numerate them so that you are in the picture of your total costs. These you will have to foot off the loan make sure you are aware what your bank requires. This is a highly mathematical exercise don’t be told otherwise.
Reducing mortgage period You can reduce the tenor of your mortgage by increasing the monthly repayments and thus own the property earlier and use it as an asset. Check if your bank doesn’t penalise you for it. It’s worth the penalty in the long run.
Insurance Enquire as to whether your bank will require insurance as well as a life policy. The life policy will increase your total monthly repayments but it safeguards your dependents on your demise so it is vital but make sure you calculate what it means to your total monthly obligations. Insurance for the property is incorporated into your loan.
Renovations Look at the possibility of also footing the bill for renovations after you have bought your dream home. Take note of these and accommodate them prior to doing the purchase. Title deeds Make sure the property you are considering has a title to it. Your conveyancing agent will seek to make sure it’s a clean house with no caveats to it. You pay your legal fees to make sure all is in order. You can even check for yourself at the deeds office. Once property is bought (mortgage loan paid in full) you also need to get title deeds in your name as proof of ownership. This document is vital in these deals. Once your leverage against your house then it is an asset.
Shop around If you have the luxury to shop around please do to get the best possible deal on the market for both the house and the bank to use. With your bank you can still negotiate for a better sweet deal. Read and understand your terms and conditions so that you are not found wanting in the future.
Mentality You definitely have to be ready to enter into this agreement and your mind has to be prepared for it. A great mind is ideal and a positive mind, which is well informed, is an asset. Please make sure you are aware what you are getting yourself into. Involve your spouse, children or any other interested parties where possible because these transactions can alter the quality of your life and your dependents. Please know the financial implications.
Rituals Throw a house warming party once you have bought a home as a way of celebrating as it is not every other odd day that you buy a house. It’s an achievement. Guess what it’s necessary and trust me on this one. It’s a feel good morale booster. Financial preparation and buying property (home property ownership) is an art that can be enjoyable when done right otherwise could turn out to be a worst nightmare that will leave you scarred for life. What a good headache. IF YOU LIVE IN BYO PLEASE CONSERVE WATER IF YOU LIVE IN ZIMBABWE PLEASE USE ELECTRICITY SPARINGLY: SOS (SWITCH OFF SWITCHES) IF YOU LIVE ON PLANET EARTH PLEASE PRESERVE THE ENVIRONMENT
Morris Mpala is the managing director at MoB Capital Limited, a Bulawayoheadquartered micro-finance institution with footprint across the country.