Yes, you know the property mantra – location, location, location. And you’ve found a cute home you think you can afford, in an up-and-coming ’hood. It’s just the house you need to finally put down your roots, and climb up the property ladder. But can you truly afford it? And will it be that good an investment?
Know now that buying property will cost you much more than the asking price. Because you’ll be taking a bond from a bank, and paying it off over 20 to 30 years — compound interest will result in you paying significantly more by the end. For instance, a bond of R1 000 000 payable over 20 years at an interest of 10,25% will cost R9 816,43 a month, says Carol Reynolds, area principal at Pam Golding Properties. This equates to 240 instalments and a staggering R2 335 943 at full term. “However, while it’s expensive over the period, borrowing money via a mortgage facility is by far the best option, and enables investors to ‘use other people’s money (bank’s money!)’ to grow their property portfolios,” she explains.
Save up as much as you can in advance, so you can pay as big a deposit as possible to lessen the bond repayments. “A big deposit also improves your chance of having your offer to buy accepted, and ensures a better interest rate on your home loan,” says Zakheni Dlamini, director of business development at SA Home Loans. Also aim to increase your monthly payments whenever you have the chance (that salary increase), and use any windfalls (your yearly bonus) to whack off more on the bond.