Peak Of Interest Rates Cycle A Golden Opportunity For Home Buyers
The peak of interest rates presents an ideal opportunity for home buyers to plan ahead and budget properly before applying for a bond and a golden opportunity for first time home buyers.
11/04/2024
Buying your first home is a momentous
decision and one that requires considerable
financial planning, says Mary Lindermann,
operations executive at BetterBond. “This is why
the forecast that the repo rate is likely to
hold steady for a few months yet before coming
down presents an ideal opportunity for buyers to
plan ahead and budget properly before applying
for a bond.” Although buying a home is a
substantial investment, there are many options
available to first-time buyers wanting to take
the plunge.
First home finance
First-time buyers with a household income of
between R3 501 and R22 000 may qualify for a
once-off housing subsidy called First Home
Finance, if they meet the criteria, says
Lindermann. “It’s now possible to obtain the
subsidy without first having been granted a
bond, which makes it even easier for qualifying
applicants to own a home.” You can use other
sources of finance, such as an unsecured loan or
employer-assisted housing scheme, to buy your
home.
A helping hand from the bank
While it’s always advisable to put down a
deposit – even if it’s only 10% of the home’s
value – when applying for a bond, first-time
buyers often don’t have the financial means to
do so. “South Africa’s main banks offer a range
of loan products that include loans of as much
as 110% for young professionals under the age of
30,” says Lindermann. A loan of 100% or more
makes it possible to buy a home without having a
deposit. It could also cover the hefty transfer
and bond registration fees that need to be paid
upfront.
Below the threshold
Another
way of making home ownership a reality is buying
below the R1 million threshold. There are no
transfer duties payable for homes of below R1
million – a considerable saving for a new buyer.
First-time buyers should also consider a new
development when looking for an investment. “No
transfer duty costs are payable if your home is
a new build, although you will still need to pay
transfer costs to the conveyancing attorney.”
Aside from the initial costs, buying in a new
development will also save you money on repairs
and maintenance for the first few years, adds
Lindermann.
Buy smarter
As a home is
a substantial purchase, it’s advisable for
first-time buyers to know what they can afford
before they start house hunting. “Obtain
pre-approval from a bond originator so that you
have a clear idea of what you can afford.
Pre-approval also improves your chances of
securing a bond,” says Lindermann. The approval
rate for clients who pre-approved with
BetterBond first is 90% of all applications
submitted to banks on their behalf.
A
bond originator will apply to more than one bank
on your behalf to secure a lower interest rate –
called a rate concession. Currently BetterBond’s
average interest rate concession when applying
to four banks is 0.61%, says Lindermann. This
means that the interest payable on your bond
will be 0.61% below what the bank would offer.