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How to buy property like a pro Save money before, during and after a home purchase BY DAISY WESTBROOKE
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AYING attention to the costs involved in every step of the buying process can save you thousands – and might even help you to pay off your bond years earlier than expected. It will also maximise your profit when you decide to sell and move on to another home, says Gerhard Kotzé, managing director of the RealNet estate agency group. Here are some steps to save you time and money: Know your credit record Before you even start to look at properties for sale, take the time to ensure you have a clean credit record and then try to boost your credit score. “The higher the score (you should aim for 660 or more), the lower your risk profile, and the more likely it is that you will qualify for a home loan at a favourable interest rate,” says Kotze. While some sites allow you to do your own check, it is recommended that you use the services of a bond originator as their reports are more detailed. Save for a deposit This, Kotze says, will make you a lower-risk buyer than someone who is applying for a loan equal to 100% or more of the purchase price. “It will also further improve your chances of qualifying for an interest rate concession.” Why does an interest rate concession matter? Because even a small rate concession will make it easier to afford your monthly bond repayments and save you thousands on the total cost of your home over the life of the bond. At an interest rate of 7.5%, for example, the monthly repayment on a 20-year loan of R1 million will be around R8 100, and the total cost of the property will amount to more than R1.93m. But if you are able to secure the same loan at an interest rate of 7%, your monthly repayment will only be R7 800 and the total cost of the property over 20 years will be R1.86m – a saving of more than R70 000. Housing subsidies If you are a first-time buyer in South Africa who earns between R3 500 and R22 000 a month, you may be eligible for the government housing subsidy Flisp, which can be used like a deposit to reduce the amount you need to borrow and help you save money every month on your loan repayment. Obtain a home loan pre-qualification This, says Marvelous Mahlangu, owner of Chas Everitt Glenvista in the southern suburbs of Johannesburg, is a free service offered by bond originators and will not only give you a clear idea of what you can afford, and help you to focus on suitable properties, but also give you an advantage when negotiating with sellers and help you save money on the purchase price. “Most home sellers know that if a buyer is pre-qualified, it substantially increases the chances of the transaction going ahead smoothly and quickly and are willing to look at lower offers from such buyers in return for this peace of mind.” Avoid overpaying Mahlangu advises thoroughly researching market trends and comparing actual sale prices in the areas you like. Never buy in a rush or under pressure, he says. Area sale reports can be obtained from independent sources, such as Lightstone Property. Rates and taxes What is the municipal property tax and could you save by buying a similar home on a smaller stand or in another area? Is the home a fixer-upper? Such properties often end up costing more to fix than any saving you make on the purchase price. Levies If the home is in sectional title complex or an estate, how much will the levy add to your monthly costs and what does it cover? Find out if there are any special levies in effect or pending as these can be real budget busters. Extra costs Do you have enough cash available to pay the bond registration, transfer and legal fees applicable to the purchase of a pre-owned property? If not, consider new developments where there is no transfer duty payable and developers will sometimes subsidise the bond registration and legal fees. Use a bond originator Once you do make an offer to purchase, the biggest money-saving move you can make is to apply for your home loan through a reputable bond originator who will work with multiple lenders to ensure you get the best home loan rate currently available to you – and all the future savings that could derive from any concession. This service is free. Reduced fee Don’t be afraid to ask for a reduction in legal fees. If you have good business relationship with a legal firm, you can ask if they will handle the transfer of your new home at a reduced fee – and ask the seller to agree to this instead of using their own attorney to do the work. Or ask that the seller’s attorney consider a reduced fee. Insurance You can sometimes save money by shopping around for the homeowners’ insurance cover that the bank granting your loan will insist on. However you must be sure to compare apples with apples, especially when it comes to any excesses payable on claims.
IF THE home is in a sectional title complex or an estate, find out if there are any special levies in effect or pending. PICTURE: THEPOWERCOUPLE/UNSPLASH
Save on bond interest Once the transfer of your new home is registered, you can continue to make savings by paying any extra cash you have into your home loan account. This might sound counter-intuitive, but with the interest rate at 7%, paying even R200 a month more on a home loan of R1m would shorten the loan term to 19 years instead of 20, and slice another R52 000 off the total cost of the property.
