Ten Tips For First-Time Homebuyers

Buying your first home is both an exciting and a stressful experience. The joy of owning your own home can sometimes be overshadowed by the concerns that come with acquiring the associated debt. Rhys Dyer, CEO of ooba, South Africa’s biggest bond originator, provides these ten tips to take the pain out of the process:

1. Save up for a deposit. This is one of the most important things you can do to help yourself obtain a bond at a good rate. The more money you put in at the beginning, the less you will owe and the more inclined a bank will be to take a risk on you.
2. Be certain of what you can afford. The amount of credit the bank will give you depends on how much you earn, your expenses and the leftover disposable income you have to service the debt. Most banking and bond originator websites have a calculator which will work out how much you can afford, like this one from ooba: http://www.ooba.co.za/calculators. Use these and then limit your searches to properties in the recommended price range.
3. Get prequalified. If you get prequalified for mortgage finance, you’ll know what you can afford, and you’ll be in a stronger position to make an offer when you find the perfect home. ooba’s prequalification service – oobaqualified – takes this a step further, and helps you to work on your affordability and credit rating if you fall short of the banks’ requirements.
4. Seek professional advice. Listen to your friends and family, but also seek the help of a reputable bond originator like ooba, who are experts in home finance and bond applications, and will give you free, impartial advice.
5. Shop around for your home: Spend some time educating yourself about what’s available in the market. Don’t buy in haste, without considering the alternatives. When you have a sense of what’s out there, you’ll be able to make better decisions as an informed buyer.
6. Shop around for a bond: Don’t just snap up the first bond offer you receive from the first bank you apply to. Another bank might offer you a better deal. A reputable bond originator will apply to multiple banks for your home loan simultaneously, ensuring that you get the best deal at no extra cost to you, with less hassle and paperwork.
7. Understand all the costs involved upfront, like levies and transfers fees. If you haven’t prepared for these, you could be in for a nasty surprise.
8. Be aware of the hidden costs and defects of any property: Look out for anything that is not working properly, from faulty wiring to subsiding walls. If you want to make an offer, bring in a specialist to inspect plumbing, electrics and structure, with particular attention to the roof. If he uncovers something, it doesn’t necessarily mean you won’t buy the property, but it puts you in a position to negotiate on the price.
9. Repay as much as you can into your bond every month: By just putting in a few extra hundred Rand a month you can save yourself thousands over a 20-year bond term.
10. Know the difference between occupation and possession: It is not your house until the transfer is registered at the deeds office. If you spend money on alterations before this happens, you could lose all the money you spent if the transfer doesn’t go through.

“By becoming an informed buyer, you will place yourself in a position of confidence as you make the biggest financial commitment of your life,” says Dyer. “If there is anything that you are uncertain about, ooba has a team of experts in home finance to help you out at no extra cost.” 

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Renting vs. Buying – which is right for you?

For most, owning a home is a dream. Settling down with a family in your very own building. But is it the better option? Or is renting just a good?

Well, the honest answer is I don’t know. No one does. Everyone has different needs and requirements and your circumstances will dictate which is right for you.

I can however make the decision a little easier on you guys. We’ve put together some benefits of renting and buying to help you decide which the better option is for you.

Renting

Renting is the popular choice for many young people who are finding their feet. It’s perfect for someone who doesn’t know what’s next in their life, and could have to move quickly.

Flexibility – Buying a property means that you’re committing to one area. You’re investing your foreseeable future in that one location.

Renting however means that you can up and move whenever required. Perhaps your finances are a little strained or you need to relocate closer to your family. Renting is the most flexible way to live.

Initial Outlay – Renting a property means that you don’t have to fork out as much money upfront. It’s probably going to be a month’s rent, a deposit and well... that’s probably it. Buying however means that you’ll have to save for quite a long time. Not good when you need somewhere to live fast.

Repair costs – If you don’t own the property, then the boiler breaking on its own isn’t your problem. This is something the landlord will need to deal with. Unless you break it yourself. If that’s the case then get your wallet out.

Less of a risk – As I said earlier, buying is tying yourself down to one area and one property. If you lose your job or fall ill for example, you can’t leave.

Buying

If you’re a family looking to settle down then this will probably be the option that you’re considering.

Stability – Everyone who is starting a family needs stability in their life. So, if you buy you’re committing to one area. This means that you’ll be able to get to know the local neighbourhood, allow your kids to settle into school and fall into a solid routine.

Live by your own rules – As I brought up earlier, renting means that your landlord repairs any damage. But they also control the property. If you purchase it yourself you can paint the walls, decorate the bathroom and knock down the garage all you want. It’s yours!

Cost – One major downfall of renting is that you’re consistently paying for something that you’ll never own. And, in some cases, your rent couldincrease. If however you have mortgage you’re paying money towards your future. Plus, the price of your mortgage will only ever decrease.

Both of these have their own obvious benefits. For the young, ladder-climbing individual, renting is the way forward. For families, buying is probably the better option.

Asses your circumstances and consider the above.

House affordability is a major concern in the current market...

South African banks are increasingly looking to the affordable housing sector in a bid to reverse skyrocketing mortgage decline rates.

Speaking at the latest International Housing Solutions’ Affordable Housing Conference, senior bank representatives said affordability was a major concern in the current market.

With home ownership on the decline, as noted in recent reports, banks remained keen to lend. However applicants were advised to ensure they did not set their sights unachievably high when seeking their first home loans.

Also speaking at the conference was Dominic Adu, CEO of Ghana Home Loans, who said mortgage decline rates in that country stood at an extraordinary 90% - primarily because applicants applied for too expensive properties and, if they could not buy them, they would rather not buy at all.

“People want homes they can’t afford,” he said.

And the desire to purchase a higher-end property than is realistic could also, in addition to other issues such as consumer-indebtedness, explain SA’s high mortgage decline rates, the conference was told.

Nicholas Nkosi of Standard Bank said the biggest reasons for the bank’s current decline rate of new mortgage applications, was credit information and affordability.

“A larger number of clients are being turned down due to their credit information, but affordability is playing a bigger role,” he said.

Nkosi added that while there was significant pressure in terms of delinquency in servicing bonds, this applied across the mortgage book. “It is positive that delinquency is not unique to affordable housing, and that the affordable housing customer is not performing worse.”

Marius Marais of FNB said the bank’s affordable book stood at about 20-25% of market share, and that the bank’s decline rates could for the most part be attributed to reasons of affordability.

Representatives from all the major banks agreed that customer education was key, especially in the affordable space, where clients often did not understand the amount of additional spend required when buying property, such as insurance, transfer duties, and rates and taxes.

Soula Proxenos, Managing Partner at IHS, said it was encouraging that the affordable housing sector was fast becoming recognised for its potential to address challenges in the property market.

“Our approach has always been to be able to provide a quality first step onto the private property ladder, and both the private and public sector are acknowledging the role the affordable sector has to play,” she said.

Approximately 200 developers this month joined thought leaders in government, the private sector and the major banks at the 2013 International Housing Solutions Developer Conference to discuss prospects offered by building housing and sustainable communities for middle-income earners.

In addition to banks’ desire to grow their mortgage base in this market, Southern African developers are increasingly looking to affordable housing when deciding on future projects, as a result of the continued growth and success of the sector..

Titled “Meeting the Demand”, this year’s conference focused on analysing the latest data and trends in housing in Southern Africa, highlighting government’s support of the sector, feedback on improved end user finance and the development and construction of affordable housing.

The conference came in the wake of the announcement of massive investment by the National Housing Finance Corporation and IFC, a member of the World Bank Group’s, into IHS’s second fund, IHS Fund II.

With its first fund, the SA Workforce Housing Fund, IHS provided financing for more than 28 000 housing units with a combined total value of more than R8.6 bn, providing tangible positive social impact for the people living in IHS developments. A pioneer fund manager in recognising the potential of developing affordable housing in developing markets, IHS opened up a valuable new sector for its investors while helping thousands of families to afford a home of their own and start their journey to wealth creation through property ownership.

The global private equity investor has, through the SAWHF, committed more than R 2bn to providing affordable housing in emerging markets while generating superior risk-adjusted returns.

Michael Otto

Home Loan Sales Consultant | Nedbank Home Loans