It is vital to determine your buying power before you shop for property

Most home buyers need a mortgage loan to finance their purchase, and the size of the loan they can obtain will of course play a major role in calculating their buying power - or how much home they can afford.

This is why it is always a good idea to consult a reputable mortgage originator like BetterBond and get pre-qualified for a bond before you start looking at properties for sale, says Gerhard Kotzé, CEO of the RealNet property group.

"However, there are other factors that will also affect your buying power, including the current prime interest rate (or mortgage base rate), the size of deposit you may have saved up and the area in which you wish to buy.

"For example, the current monthly repayment on a 20-year bond of R1m at the prime rate of 11,75% is around R10 900, and you would require a gross monthly household income of R36 000 to afford it.

"But if you could pay a deposit of 5% (R50 000), the minimum monthly repayment would drop to around R10 300. If you could also secure a 0,5% interest rate concession, which is the average that BetterBond negotiates for its clients, the instalment would drop further to around R10 000, and that would enable you to buy the R1m home with a gross household income of around R34 000."

Alternatively, he says, you could go the route of buying a home in a less-expensive area, and that would mean you needed a smaller loan - which you could be approved for even if your income was lower.

"The rule of thumb for most banks is that your monthly bond repayment should not equal more than a third of your gross monthly household income, and according to the latest figures from StatsSA, the average monthly salary in SA currently is R27 000.

"This translates to an average monthly bond repayment of R9 000 for a single buyer, and R18 000 for a two-salary household, and puts the maximum buying power at R750 000 for a single buyer earning an average salary, and just under R1,5m for a couple."

But once again, says Kotzé, if you are able to pay a deposit or secure an interest rate concession, you may be able to stretch that buying power without increasing the minimum monthly loan payment or needing to earn more.

"We do always suggest, though, that buyers should never purchase at the limit of their affordability, but should rather always consider a less expensive property or a less expensive area so that they have some room to manoeuvre in case of emergencies or future interest rate increases.

"This strategy will also enable them to get their homes paid off faster if they wish and save many thousands of rands in interest, and to reap even bigger benefits when interest rates decline, as they are expected to do later this year."