Buying a home is the biggest financial commitment that most people will make in their lifetime. You’ll need to line up a deposit and calculate what monthly bond repayment you can afford. For those who are struggling to afford it all, ooba, South Africa’s biggest bond originator, says there are options.
When you start thinking about buying a home, the first thing that you need to do is save up for a deposit. “This is both a good way to assess your ability to afford your monthly bond instalments, and it makes banks far more likely to approve your home loan,” says Linda Rall, ooba’s KwaZulu-Natal sales manager.
Then remember that, aside from your deposit and your monthly repayments, you will also have to come up with the cash for the legal costs, transfer duty, bond registration and bank fees.
Calculating the cost of property finance
ooba has several online tools to help you calculate the costs involved in your property purchase:
Linda Rall says that it is best to have your affordability assessed upfront. “ooba can provide you with a prequalification that will give you an accurate idea of what you may qualify to buy for and what amount you will need to save up in order to provide the required deposit.” “Don’t despair if you’ve found your dream home but you find you are short on funds for the deposit and monthly home loan repayments,” says Rall. “At this point, you still have options.”
Getting a guarantor
If you find that you are unlikely to secure a home loan based on your own income, you can approach a family member to act as a guarantor. Not all banks accept the offer of surety by another party, but for those who do, the person signing surety must qualify for the home loan in their own right, and should have a direct interest in the property, like a child living on the premises.
“It is very important that both parties are happy with this arrangement,” says Rall. “Remember that should you default on your monthly payment, the guarantor will be liable. So you have to be certain that will not happen, and your guarantor has to be confident that they’re able to manage financially if it does.” Rall advises that you have a written agreement in place to cover this eventuality.
Buying with a partner
Another alternative is finding a partner to share the purchase of your new home with. “This becomes a massive personal commitment as well as a financial one,” says Rall. “So you need to be sure that you have worked out all the ins and outs of the process before you sign the offer.”
She says that property-buying partners should commit certain things to writing: What will happen if one partner wants to leave or in the unfortunate event of the death of one of the partners. These outcomes should be committed to a contract and be drawn up by a lawyer.
“Both parties should also be willing to disclose any financial issues that might affect the partnership, as they will both be independently assessed by the bank as individual buyers,” says Rall.
Once the property has been purchased, she advises that the partners ensure that the costs of maintaining the property are equally shared, or at least that they are carefully recorded, so that the proceeds can be split fairly when the property is sold.
Finding the money elsewhere
If none of these options are available to you, it is possible to obtain a short-term loan of up to R150 000 to bulk up your deposit, but be aware that you will have to show affordability to cater for the short-term loan repayment and such loans are generally at a high-interest rate.
Or if you belong to a pension or provident fund, it can be possible to use that as security to borrow the deposit for your home loan.
Buying your first property can be a confusing and daunting exercise, so it’s very useful to have the insight of an expert to guide you while making these tough decisions and commitments.
“If you use an expert bond originator like ooba, they will shop around to get the best deal on your bond, submitting your application to up to eight banks, improving your chances of approval and of getting the best possible interest rate – at no cost to you,” says Rall.
“ooba currently gets seven out of 10 bond applications approved, which means you’re 33% more likely to get a bond using ooba, than if you were to go directly to your bank.”