Taking the plunge - advice for younger property buyers

Property is a worthwhile investment but for younger people hoping to buy it is difficult to take the first step, but not impossible says Rhys Dyer, Chief Executive of ooba, South Africa's leading bond originator that places one in five South Africans in their homes.

"While many young people acknowledge that property is an important investment, they are up against hurdles which include escalating housing prices, increases in interest rates and the National Credit Act," says Dyer.

People usually have to wait a good few years into their working career before even starting to think of buying a property of their own, but there are a few ways of getting around this.

"Parents are a useful source, their accumulated wealth could work for you as leverage if they are prepared to act as guarantors for your bond," suggests Dyer. "Banks are more willing to back first time buyers if they have some sort of guarantor and will be more favourable to negotiating better terms. But, be careful, if you default on your payments your guarantor will be responsible for your outstanding payments."

For those who don't have parents to rely on buying with friends is another option.

"Many younger people are also considering buying with friends, which is a good idea if you are unable to afford a bond on your own salary and an affordable way to get onto the property ladder," says Dyer. "But ensure that you have a watertight contract when entering into this type of agreement."

Ensuring that your credit is sound helps with securing a mortgage.

"Just because you are young it doesn't mean that you shouldn't be worrying about your credit rating," warns Dyer. "By demonstrating that you are a responsible spender, banks will be more amenable to lending you money. Don't think that no one will notice if you haven't paid that Truworths card or cellphone bill".

"Make sure that you get professional advice when starting the process of getting a mortgage," says Dyer. "Talk to a professional in the property industry to get a good feel of what to expect. Ensure you use a reputable individual or company in the industry. MortgageSA are experts as mortgage originators and will offer sound advice when it comes to qualifying for a mortgage."

While it is desirable to invest in property, it is not advisable to stretch yourself beyond your means.

"Stress test your budget against interest rate increases," advises Dyer. "Don't rely on the interest rate staying the same or decreasing. Work out the extra costs per month if the interest rates were to increase and check if you are still able to afford the repayments".

"Finally, make sure that you are emotionally committed to such a big decision," warns Dyer. "For at least the next few years, money will be tight and luxuries such as holidays and dinners out will fall away in lieu of bond repayments."

"The worst situation you can get yourself into is having defaulted on your payments. If the property is repossessed it will take a very long time, if ever, to be able to buy another property," says Dyer.

But, if you are willing to commit yourself to a more restricted lifestyle for a few years, it will pay off greatly in the future.

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Property is a worthwhile investment but for younger people hoping to buy it is difficult to take the first step, but not impossible says Rhys Dyer, Chief Executive of ooba, South Africa's leading bond originator that places one in five South Africans in their homes.

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