MONEY CLINIC | I have R5m. Should I pay cash for the house I want or apply for a bond?

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A Fin24 reader looking to buy a house with money he has acquired, asks which will be the best way to purchase the house.

He writes: 

I have a credit score of 588. I have no outstanding debts nor have I ever been under any debt review. I have recently had a windfall to the tune of R5 000 000 & I would like to purchase a three-bedroom townhouse which is on the market for R1 699 000.  

It came to my attention that I may have two options for purchasing the townhouse: 

1. Cash Purchase.  

OR  

2. Bond Application.

I'm willing to put down a deposit of R606 000 towards the bond. And with an interest of 7.3% over 20 years with SA Home Loans, I'm estimated to be paying R8 672 monthly towards my bond.

My dilemma is this: I am not employed. Therefore I haven't been receiving a regular & stable income for about three years now. I also don't have any accounts in my name currently, as I paid everything off about two years ago.

Will my bond application be successful, regardless of my lack of stable income over the past few years?

Hardi Swarts, director of Autus Private Clients responds: 

Congratulations on being debt-free! It’s a privilege to be financially independent.   

In my opinion, you won’t qualify for a bond. But the good thing is that you don’t need one, as you have sufficient capital to purchase the home. A cash purchase will save you a lot of money in interest over the next 20 years. You’ll also save on other costs such as the bond registration and life assurance you’ll need to cover the bond.

What’s more, it’s a buyer's market at the moment, and you may be able to negotiate a lower price, being a cash purchaser.

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