In June this year, the deputy director general of Stats SA, Joe de Beer, announced that the country had entered into a technical recession.
But even if you cannot buy a property right now, you can still start putting the wheels in place in order to save towards getting yourself onto the property ladder. Property will always be a good long-term investment and it gives you the added benefit of owning your own home.
Here are five tips to help you get on the property ladder:
1. Work out your loan affordability
There are many tools online that can help you determine how much you will be able to borrow when you input your income and expenses, and tell you how much your monthly instalments will be. Banks that offer home loans all have home loan calculators on their websites, and so does external companies. This could give you an indication as to what you can afford, and how many sacrifices you would need to make in order to pay the instalments. And if the loan is not the amount that you would like, you can work out how much you need to be earning in order to afford the home that you want, and therefore how much of a raise you would need, or how much you need to save to make up the difference. Some calculators and mobile apps also take into considerations extra costs such as transfer and bond registration costs.
2. Save more than you need for the deposit
When you are saving for your deposit, a good tip is to save more than your deposit because you also need to take into consideration the transfer and bond registration fees that will be payable to the conveyancing attorneys. There are also moving costs, renovations, purchase of furniture and utility connection costs that you need to take into account. A bigger deposit will also help to improve your lending relationship with your bank.
3. Set yourself a deadline
Deadlines and goals are important to keep yourself motivated. Determine by when you would like to have a property of your own and work towards your goal or else you would also find excuses to not save or to use your savings for something else instead of your initial goal.
4. Free up your disposable income
When obtaining a home loan, the bank usually requires that the instalment on your home loan would not work out to be more than a third of your gross (pre-tax) monthly. They will also look at your monthly debit orders, though, and check that you have enough disposable income (salary left after tax) to survive every month after paying your instalment. If you find you are currently spending some of your salary on wasteful items, start seriously considering cutting down on luxuries and wasteful spending before focusing on saving to own your own property. The fewer expenses stated on your application, the bigger your chance of getting that loan – and being able to pay the instalment every month.
5. Move to a cheaper area
When buying property, research always needs to be done with regards to what area you decide to move to. Some areas have premium rates because they are closer to the CBD or have a lot of schools around them. Also just because a property is not in a premium area does not mean that it is not a quality property. If the property that you wish to buy is not in a premium area, you would not need to save as much to pay for it, and you can afford it much sooner. Saving for a set goal can be a complicated business but with Sanlam’s Smart Invest you can work out quickly and easily how much you need to invest in order to make sure that you can put your foot on the property ladder, with just a few easy clicks online.