You need a ‘big picture’ budget for home ownership.
How much the bank will lend you is not the only thing to
consider when you’re applying for a home loan.
As a home buyer, says Rudi Botha, CEO of BetterBond, SA’s
biggest bond originator*, you also need to budget for the ongoing costs of
property ownership, and ensure that you will be able to afford these as well as
your monthly bond repayment.
“For example, once you take occupation of the property, you
will be liable to pay for services like water and electricity, and once the
property has been transferred into your name, you will also have to pay
municipal rates.
“Failure to pay these amounts could lead to legal action and
even to the property being sold to clear the debt. So before you commit to a
property purchase, you should find out what the seller has been paying for
municipal services and rates for the past year, and build this cost into your
monthly budget.”
In addition, he says, you should budget a monthly amount to
maintain your home and garden if you have one. “Many people don’t know this but
keeping the property in a reasonable state of repair is actually a condition of
most home loan agreements. And in any case, the long-term financial
consequences of neglect are usually greater than the costs of regular
maintenance.”
There can also be substantial insurance costs associated
with home ownership, notes Botha. “Financial institutions usually insist, for
example, that the property itself is insured at replacement value - that is the
amount it would cost to rebuild should it be destroyed by fire, flood or other
disaster.
“This is known as homeowners' insurance (HOC) and most
buyers just allow the premium to be debited annually to their bond account.
However, paying the premium separately when it falls due can save thousands on
the eventual purchase price of a home and buyers should also consider setting
aside a monthly amount towards this.”
Your lender may also insist, he says, that you take out life
insurance to cover the balance owing on your bond in the event of death or
permanent disability. This is known as bond insurance and premiums are
generally payable monthly.
“And finally, it is advisable as a home owner to have
short-term insurance that covers you for the loss of any of the contents of
your home due to disaster or crime. Many people also elect to pay monthly for
the services of a security company or make a monthly contribution to a neighbourhood
watch programme.”
Taken all together, these additional costs of home ownership
can amount to almost as much as your monthly bond repayment, says Botha, and
may in fact mean that you have to revise your ideas about what sort of property
to buy.
“However, as a responsible originator, we strongly believe
in prospective buyers applying for loans that they will be able to afford
without financial strain - and buying a less expensive home is certainly a lot
less difficult than losing a more expensive one – as well as one's credit
rating - for the lack of proper budgeting at the time of purchase.”
Issued by etc
Anne-Marie Bamber is Norgarb Properties dedicated Home Loans Consultant. She has over 15 years’ experience in assisting clients with their Home Loan needs and has placed many happy families in their dream homes.
Contact her today for no cost stress-free home-buying.
Anne-Marie Bamber
Home Loans consultant
Tel: +27 (0)21 851 3568 | Fax: +27 (0)21 441 1494 | Cell: +27 (0)82 071 1665
E-mail: anne-marie.bamber@betterlife.co.za
Contact her today for no cost stress-free home-buying.
Anne-Marie Bamber
Home Loans consultant
Tel: +27 (0)21 851 3568 | Fax: +27 (0)21 441 1494 | Cell: +27 (0)82 071 1665
E-mail: anne-marie.bamber@betterlife.co.za