Get your finances in order – it’s the ideal time to buy a new home

There's nothing quite like a global pandemic and several weeks of lockdown to put one's priorities into perspective! Unsurprisingly, many people are thinking about their financial stability and long-term investment goals.

While the property market too has been affected by lockdown restrictions, as a tangible asset it remains a good investment option even in challenging economic times, says Carl Coetzee, CEO of bond originator, BetterBond.

"Already, there has been an increase in home loan applications, with June showing volumes well above pre-lockdown levels," says Coetzee. This may be due in part to pent-up demand after the restricted sales activity from March to June. However, house price inflation was slowing in many areas before the lockdown, and the record-low interest rate - with yet another cut on the cards - has created the ideal opportunity to invest in the property market.

The FNB Property Barometer for June says that the low interest rate coupled with the average discount in asking price of 12%, and lower transfer duties will support buying activity going forward, and is likely to contribute to a rebound in the residential property market in 2021.

Calculate how much you can afford

The process of buying a home starts very simply by assessing and organising your personal finances as they currently stand and then plotting your long-term financial goals and a way to achieve them," says Coetzee. "Buyers need to arm themselves with the facts and figures associated with buying a home before they start to look at properties," advises Coetzee. "They need to understand what - and where - they can afford to buy, so that they know where to start looking. This knowledge will also strengthen their hand in dealing with real estate agents, who will appreciate that buyers have done their homework."

Save with a bond originator

First home buyers may not know that it costs nothing to use a bond originator, and in fact, they should do so early on. A good first step is to work out what you can afford, with the use of an affordability calculator such as the one on BetterBond's own website.

Explains Coetzee: "Using the value of your gross and net income as well as your monthly expenses, an affordability calculator will work out how much you could qualify for in a bond as well as what it would cost you per month. Plus, a bond originator can supply this information to you officially, arming you with a 'pre‑approval certificate' - a document that indicates what you may be able to afford - even before you start to look."

The site also allows you to do multiple calculations. For example, a 'deposit savings' calculator works out how much you need to save each month, and how long you'll need to save for a certain deposit.

Once you've found a home and have the required deposit, a bond originator will also act on your behalf, making contact with several banks to negotiate the best possible interest rate on your bond. "Obtaining the best interest rate for a potential home buyer is one of the most important things a bond originator can do and can save a homeowner thousands of rands in interest payments over the lifespan of their bond, if they choose to hold on to a property until it is paid off," stresses Coetzee.

"For example, a difference of as little as 0.5% in an interest rate can result in a saving of around R72 000 on a home loan of R1 million, taken over a standard 20-year bond term."

Know your credit score

However, Coetzee adds that the entire process begins by understanding your creditworthiness, and a two-pronged approach is required.

The first is to find out what your credit score is - how credit agencies rate your credit history based on how well you manage your existing financial responsibilities. Explains Coetzee: "The higher your score, the higher the bond that banks will be prepared to offer you. If your score is low, then you would need to work on getting your financial house in order before you buy a real one."

The second requirement is to understand your current monthly expenses in order to ascertain exactly what you could afford in a bond, or put away each month towards a deposit. "And this begins with something as simple as setting up a monthly budget, to see where your money currently goes and where you could cut back in order to build up a deposit as soon as possible," advises Coetzee.

The sooner these are on track, the sooner you'll be unlocking the door both to your own home and a solid long-term investment.