Purchasing a property is a very exciting time in your life, but can also be a very frustrating if you don’t go into the process with a full understanding of what will be required of you, and how it will impact you financially.
To avoid the frustration of purchasing a property and losing out because your finance is declined, the very first thing you need to do is get yourself pre-qualified by a mortgage broker. Don’t make the mistake of thinking that you’ll go to your bank, or that your banker has already indicated you’ll be fine for your bond. Your banker at the branch has absolutely no involvement in your bond application process, and no influence either. So find out from a neutral party what bond you will qualify for.
Also, ask your loans consultant what loan-to-value you should qualify for. This will depend largely on your bank – but you will receive an indication of what deposit you will need. It’s important to note that the majority of 100% bond applications are rejected. That means you will almost certainly need a deposit – so budget at between 10-20% of your purchase price. The deposit needs to be available, and not tied up in medium to long term investments that you can’t access. Upon signing an offer to purchase, you will usually need to pay a minimum deposit, that is often set at 10% of the purchase price – so have this available. It’s invested in a trust account and you get the interest on it until transfer. It’s also important to know what transfer and bond cost you will need to pay.
On a property of R2.5 million, with a 90% bond, your transfer and bond cost are just over R178000. So you’d need this in addition to your deposit.
There is also another cost to factor in, you will need home insurance, the bank doing your bond will offer you this, but often pays to shop around for the best rates and terms. Don’t forget to find out what the excess is on the policy….
If you are part of a Home Owners Association or Body Corporate don’t forget you will have monthly levies to pay, so find out what they are and set up the debit order. Additionally, there are monthly rates and taxes to the local municipality, there is usually a delay of a few months after transfer until these accounts start coming through – so budget for this to avoid the unpleasant surprise of a four months’ rates bill later. The same applies to your water and electricity accounts.
Budget properly for your real estate investment and you’ll be sure to avoid unnecessary financial stress...
Compiled by: Cornell Smit