First Time Buyers
Home ownership is an exciting achievement, allowing us to create a space where we can express ourselves and share special times with our families and friends. However, getting home finance can be daunting since the process and paperwork are unfamiliar and can seem confusing. This is where SA Home Loans can help you. They make it as simple as possible, and will guide you through the process, making sure it''s as stress-free as possible. Hopefully after reading this you will have a better understanding of what to expect and how to go about buying your home.
Are you ready for the commitment of a home?
Buying a home comes with some new responsibilities, so you need to be sure you''re ready for these. Getting a home loan means that you are undertaking to pay bond instalments every month, but there are also other expenses to consider: rates, levies, water, electricity, maintenance and insurance are some of the additional costs that you will need to budget for. It will take self discipline and good financial management to make sure you meet your financial commitments.
What can you afford?
Once you have decided you are ready for home ownership, you should calculate the value of the home you can start looking for. The first step is to calculate your gross household income, so if you are married this would include your spouse''s income too. The home loan amount you may apply for will be determined by this joint household income figure, because a responsible lender must ensure that a borrower can afford the resulting loan instalment when assessing a loan application- this is required by National Credit Act. Ideally, your monthly home loan instalment should not be more than 30% of your gross monthly income.
This table gives you an approximate maximum loan amount and instalment for different income levels, using a maximum payment to income (PTI) of 30%.
| Gross Joint Monthly Income | Maximum Instalment | Maximum Loan |
|---|---|---|
| R12 000 | R3 600 | R372 000 |
| R18 000 | R5 400 | R560 000 |
| R26 000 | R7 800 | R810 000 |
| R40 000 | R12 000 | R1,24m |
| R60 000 | R18 000 | R1,8m |
This table is based on an interest rate of 10% per annum and a typical repayment term of 20 years - if the interest rate is lower (or the repayment period longer), you can afford a higher bond and vice-versa. Note that this is only a rough guide; a responsible lender will look specifically at the unique affordability issues for each borrower.
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Other Costs to Consider
As well as the purchase price, there are a number of other big expenses when you buy a home. Transfer Duty and the transfer costs may be your biggest expense in purchasing your property. Transfer Duty is paid to South African Revenue Service every time a property changes hands. However, no transfer duty is payable in respect of a new purchase from a Developer. The purchase price includes VAT which is payable by the Developer. For all other purchases, duty is calculated according to the purchase price of the house. If the home is bought for R750 000 or less, no transfer duty is payable. This value is reviewed periodically by the Minister of Finance.
When you take a home loan, there is also the cost of registering the Mortgage Bond. This is the document confirming the mortgage which registered in the Deeds Office. There are also attorney fees, initiation fees and a monthly administration fee. Be sure to ask your lender for a breakdown of all the costs you will be expected to pay.
Finding a home that suits you
Now that you know what you can afford, it''s time to go house-hunting! Think carefully about what''s important to you: which area will be convenient for getting to work and schools? Do you want a garden and does the property have security? Are there enough bedrooms and bathrooms for everyone? What size kitchen you would you like and do you need a garage? Make a list of what you 'must have' and what would be 'nice to have', remembering that you can always do alterations or renovations later to add the features you would like. Kitchens and bathrooms are usually the most expensive rooms to renovate, so if you think you''ll need to do this, make sure you budget for it.
You may choose to look at new developments or work through an estate agent to show you existing residential houses on the market. There are a number of websites you can also consider - and of course the newspapers have listings every weekend of homes for sale.
If you are using an estate agent, their role is to bring together the seller and the buyer, and finalise the sale. If this is successful, the seller pays the estate agent a commission from the sale proceeds. The buyer is not required to contribute to the estate agent''s fees.
An estate agent will discuss your requirements and arrange to show you properties that match your needs and price range. The price is normally negotiable and buyers seldom pay the full asking price. The estate agent will present your offer to the seller and allow them to decide whether they find your offer acceptable or not.
It''s always a good idea to have the property checked out for any defects by a company specialising in home inspections. The ordinary man-in-the-street will not usually have the expertise to recognise structural problems or major defects if they are not obvious, or if they have been disguised.
Applying for a Home Loan
Once you have found a home you want and have put in an Offer to Purchase, you''re ready to apply for a home loan. SA Home Loans will guide you from here on and you can have a look at the next page, the Step by Step process, to see exactly what happens at each stage during the SA Home Loans application process, until your home is registered in your name.
Source: Information supplied by SA Home Loans