Top financial tips for homebuyers

Buying a home is not just about providing a safe place for you and your family to thrive, but also about laying the foundation for your financial future, so it's worth taking the time to ensure that you're properly prepared before you make an offer to purchase.

That's the word from Gerhard Kotzé, CEO of the RealNet property group, who says it is essential, for example, to assess your financial health before considering a home purchase. "A good credit record is vital when applying for a home loan, so check your credit score, settle outstanding debts as far as possible and ensure that you are paying all your accounts on time. If you still have some 'black marks' on your record from old debt problems or judgments that you've resolved, you'll also need to contact the credit bureaux to get these removed.

"Next, you'll need to think hard about affordability, because you'll still have living costs and possibly other debt instalments to pay on top of a monthly bond repayment, and you don't want to end up struggling to make ends meet every month. If you're unsure about how much you can afford to pay for a home or what size home loan you could obtain, you really should consult a reputable bond originator like BetterBond before you go house hunting."

In addition, he says, prospective buyers need to ensure that they have enough funds available to cover the additional costs of a home purchase, including legal fees, transfer costs and duties and bond registration fees as well as a deposit if necessary. "You may be able to obtain a home loan that covers all these costs, but this will mean that you are borrowing more than the property is currently worth, so you should be sure that you are not going to resell it before its value increases to more than you owe the bank."

"It's important to note that paying a deposit does also improve your chances of qualifying for a bond, and of possibly securing an interest rate concession that could save you many thousands of rand on the total cost of your home over the life of the bond."

Kotzé says prospective buyers must also leave room in their budgets to cope with future interest rate increases as well as ongoing homeownership costs such as municipal property tax, insurance and maintenance.

"It's also a very good idea to take out 'bond insurance', which is a type of credit life cover that will protect your family if you become disabled or die. It will pay off whatever is outstanding on your bond so that your family does not have to worry about the monthly instalments or sell your home because they can't afford to pay."

When looking at homes to buy, he says, you should also be aware of the financial implications of purchasing different types of properties. "If you buy a freehold property, for example, you will always be solely responsible for all security and maintenance costs and, depending on the price, you may also have to pay transfer duty. On the other hand, if you buy a sectional title home, you will be signing up for a monthly levy in addition to your bond instalment and will need to carefully check the finances of the complex as a whole before you buy. But if you buy a new sectional title home from a developer, you will not have to pay transfer duty.

"Any good property professional will be happy to give you more details about these differences and what they might mean to you in future so you can make an informed decision about what is right or you and your family."

And speaking of the future, Kotzé says one of the best things homeowners can do to accelerate the process of building personal wealth is to work on paying off their bond as fast as possible. "To do this, they should strive to always pay more than their minimum monthly instalment, and pay any extra money they have into their bond account. This will not only shorten the repayment period, but also deliver significant interest savings."