Cape Town – Before buying a home, there are four key issues Lephoi Mokgatle, head of home loans digital at Nedbank, says first-time buyers should consider.
Mokgatle, with more than 20 years' experience in the home loan industry under her belt, shared her insights about first-time property buyers at the recent Property Buyer Show in Cape Town.
The issues she raised include:
1. Choose your hood
“Be very mindful of your location and not only mindful about the actual property,” Mokgatle said.
Recalling her own experience as a first-time property buyer 20 years ago, Mokgatle tells how she chose a cheap property in an “expensive” area. When she decided to sell the property seven years later, it had more than tripled in value.
“Don't try to get the best-looking house. I am not saying the way your house looks is not important - but consider the area you are buying in, and the ability of the area to have your house price appreciate phenomenally,” she explained.
2. Know your financial status
Buyers should get a free credit report from either one of South Africa's two credit bureaus, Experian or TransUnion.
“It does not matter how much credit you have, it matters how you manage your credit over a 12- to 24-month cycle,” she said.
Mokgatle warned buyers about having too many personal loans as banks are mindful of the risk associated with these, even if the consumer is paying off loans properly.
Be mindful that a personal loan collects far higher interest rates than “anything else”, she said. Rather opt to save for a deposit instead of taking out a personal loan for the same purpose.
Banks are often more comfortable with car finance or other bonds, she explained.
Mokgatle said that if a buyer has a judgement against them, they should make an arrangement to have the judgement rescinded by the courts because banks consider this in a serious light.
3. Use online tools available
Getting pre-approvals for bonds from banks is looked upon favourably. You can do this by making use of a mortgage originator. There are also tools available online to check your financial status.
Bond calculators are often available for consumers to use online to check if they can afford property.
4. Understand the costs associated with buying property
A deposit for a house is not the only cost to consider, Mokgatle explained.
Applicable upfront costs include the bank initiation fee. This is a flat rate across banks which is R6 000 and is payable before the bond is registered.
The second applicable fee is the attorneys' registration fee. Multiple attorneys can be involved and separate fees are charged for the separate skills required, Mokgatle explained.
For example, a fee is paid to the attorney to register the bond in favour of the bank through which you are getting your bond. Another set of attorneys is responsible for the ownership transfer.
There is also a transfer duty payable to the South African Revenue Service, she said.
On the seller’s side, there is a bond cancellation fee involved if you have to cancel the bond.
“Be aware of any kind of costs associated after moving in. People do not realise after moving into a property that there’s a lot to be done,” Mokgatle explained.
These are not just the costs of moving, but things that could go wrong with the house you may not have been aware of, for example repairs and maintenance.
“Rates and taxes are another cost,” she added. Rates and taxes do not apply to those who rent, but they do apply to property owners, Mokgatle explained.
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