Before you buy a property, there are many things that should be considered like your affordability, how to get the best bond and when to make a purchase. Here we cover some of these topics in a bit more detail:
Before a financial institution grants you a home loan, or bond, they will do an eligibility or financial fitness test. The main aim of this is to ensure that you can afford to service the bond. They will look at things like your current income and expenses, how long you have been employed and your credit history. Although it may seem logical that living credit-free is the best way, this may not be helpful when it comes to getting a bond. Any financial institution wants to see that you have a credit history and that you have a good credit record, even if it is an Edgars account that has a positive balance or zero funds owing – you do not need to owe someone money to show the bank that you have a credit history.
Finding the best deal
Shopping around for a bond can be confusing and tiresome. There is a lot of administration and paperwork involved. Fortunately, you can procure the services of a Bond Originator to help you find the best deal. They will communicate with the banks on your behalf, ask all the necessary questions and submit the paperwork and then come back to you with options. There are companies, like Ooba and Better Bonds, which expressly offer this service. One thing to remember is that a bond originator is not a bank – they do not lend money or grant home loans – they are simply a registered financial services provider acting as the middleman between you and the banks.
In the last 5 months, South Africa’s interest rate has dropped by 2.5%. Although this may not sound like much, this drop makes a huge difference when it comes to paying off a bond and translates into lower monthly bond repayments for you. With the interest rate currently at 7.25% and the lowest it’s been in about 47 years, now is the most favourable time to buy property. It is not likely we will have an interest rate as low as this for a long time. Have a look at the table below to compare your bond savings since January this year:
|Purchase Price||Month||Interest rate||Monthly bond repayment||Savings|
|R2 000 000||Jan 2020||9.75%||R18 970|
|March 2020||8.75%||R17 674||+ R1 296|
|April 2020||7.75%||R16 419||+ R1 255|
|May 2020||7.25%||R15 808||+ R 611|
Investing in your first property needn’t be daunting – arm yourself with as much knowledge as possible and ask questions. Your sales agent and bond originator are there to help you through this process. The more you know, the better it will be when it comes time to make a decision.