For many South Africans who are looking to get a step on the property ladder, the recent shift to buyer’s market has shown some hope in affordability of property prices. Yet, going from being a tenant to a homeowner can be a complicated shift and requires a little more than just favourable market.
Here are our handy tips for those who want to move from the rental space into the buying world in 2019:
1. Get financially fit
The number one place to start the house-buying process is to look at your finances and ensure your credit score looks favourable to lenders. Your debt-to-income ratio (along with your credit score) will ultimately influence which bank will lend you money and at what interest rate. So, begin by paying off those bad debts first and paying any creditor on time (late payments will influence your credit score). If you’re unsure about what else you can do to help, chat to someone at your bank or ask the help of the Rawson Agent, who will be able to guide you more on being financially fit.
2. Know how much you can afford
The second aspect to look at – before you even start searching for a property – is how much you can actually buy for. A good starting point is looking at what you’re currently paying on rent, and asking yourself if you’re comfortable to pay more on a bond (your bond repayments are likely to be higher than your rent costs). It’s also important to understand that as a homeowner, any repairs of faulty or broken items will come out of your pocket; plus, you will have an additional cost of rates, taxes and water (which are often not included in rent payments).
One of the best ways to know what you can truly afford is to get a pre-qualified certificate from any mortgage originator. Rawson Finance, the mortgage origination arm of Rawson Properties, can provide you with free, no-obligation certificate that will better equip you in knowing what you can afford. Please note that you will be required to – amongst others – submit an expense sheet (provided by a mortgage origination consultant), bank statements and copy of your payslip. If you would like Rawson Finance to assist you with a pre-qualified certificate, please click here.
3. Set Up A Timeline
Next you need to look at when your lease expires, as this will give you a better idea of when you can move into your new home. There are landlords who understand when a tenant needs to break a lease as they’ve purchased a home. However, this has the potential to turn into unnecessary stress in the event of penalty fees, loss of security deposit or having to find a replacement tenant.
Instead, work back from when your lease ends. For example, if your lease expires at the end of July, you will need at least two days to clean it up to ensure you get your deposit back; further more, it can take up to two days to move all your belongings over to your new home. In total, you will need four days for the big move and clean up. This means, that you need take occupancy in your new home by 28 July. From here, you can work back to when you should start shopping; keeping in mind that it can take anywhere between two weeks and three months to find the right home.
In addition, it’s always better to be upfront with your landlord and inform them that you’re looking into buying property – if they are prepared, they are more likely to understand in the event that you have to break your lease. We also recommend that you only start the process in the latter half of your lease, especially as it can take up between two and three months for the registration of your property.
4. Understand the cost involved in moving.
We’re not only talking about how much it will cost to physically move from your rental home to your new, purchased home. Many first time buyers are often unaware of fees and bills that sit outside of the price of the home. These can include:
Transfer fees: while it depends on the purchase price, it’s a good idea to make room for an additional 8%-10% of the purchase price when transferring the property onto your name (note: there is no transfer duties on properties under R900 000).
Bond costs: if you’re registering a bond, you can expect to pay a home loan initiation fee – this is about R1 000 plus 0.4% of the value of the loan. You will also be liable to pay a Conveyancer fee; these are payable to the attorney charged for registering your mortgage bond. The amount can range anywhere from R13 000 (ex VAT) to R20 000 (ex VAT) for a bond between R1-million and R2-million
It’s important to make sure that you have sufficient funds to pay for these, as these fees do not form part of your mortgage; and delaying payment may result in interest being charged or, worse, a delay in registering your home.
5. Choose your new neighbourhood wisely
Before shopping around, think about what you want your ideal neighbourhood to look like: how important is it to have good schools or grocery shops around; does the night life appeal to you or do you prefer a quiet area? Also consider how many properties have been sold in the area where you want to move to in the last year, and what they sold for; as well as what the potential growth in price would be in the next five years? A Rawson Estate Agent will be able to provide you with all the necessary information that will help you make an informed decision.
6. Think about getting your potential new home inspected
Whether you’re considering buying a relatively new home or opting for a vintage number, it’s a good idea to get someone to assess the structure of the building before you make an offer – especially as the cost of fixing any problems (big or small) will rest on your shoulders once you take ownership. Once you’re armed with a report of potential problems, you can ask the necessary specialist to quote on those repairs. Also, don’t be afraid to get a second opinion to ensure you have peace of mind about the investment you’re making.
7. Become conscious of your spending
Have you ever really inspected your bank statements and picked up on those unnecessary expenses that you’ve just swiped your card for willingly at the time? We’re talking about that daily flat white, those once-to-twice-a-week lunch takeouts at the office, those expensive dinners out, a gym membership you’ve not used in two years… Yes, they might seem small and insignificant at the time, but over a few months, they can rack up some serious dosh.
Instead, pay careful attention to what you spend your money on and questions whether that R120 a week you spend on coffee can make a difference in paying off debt, with a down payment or moving costs.
8. Ask for help from the right people
Deciding when and where to invest in property isn’t an easy task. So, ask for the help of professionals who know and understand the property market, and who will guide you in making a sound investment.
Each Rawson agent is certified and knows their neighbourhood inside out. Our in-house training academy keeps them up to speed with the latest legal and industry developments.If you would like a Neighbourhood Expert to from Rawson Properties to assist you in going from a tenant to a homeowner, please click here to get in touch with an agent