Preparing to buy a home


Get your finances in order

Get your finances in order

In this article:

Calculate how much you can afford

Save with a bond originator

Know your credit score

Buying your first home or relocating to a new one is a life-changing event. For a smooth transition to your new property and many years of happiness in a house you make your home, you need to make sure you have your finances in order. You can get your financial ducks in a row with these three tips.

1. 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. For starters, you need to arm yourself with the facts and figures associated with buying a home before you start looking at properties. You need to understand what – and where – you can afford to buy, so that you know where to start looking. This knowledge will also strengthen your hand in dealing with real estate agents, who will appreciate that you have done your homework.

2. 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.

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.

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.

3. Know your credit score

However, 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. 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 to ascertain exactly what you could afford in a bond, or put away each month towards a deposit. 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 to build up a deposit as soon as possible.

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.

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