Property is one of the most expensive purchases a person can make. For many, the monthly costs of owning their own home might seem too much to afford; but, there are ways to minimise the monthly expenses of homeownership.
Financing mechanism
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, explains that owning a home is a great investment strategy, especially if the homeowner pays down the debt owed on the home as soon as possible.
“Outstanding debt and the interest charged on the home loan eats into the profit the homeowner stands to make if and when the property is sold. I would always recommend paying off the home loan as soon as possible and to avoid taking on too much debt to begin with, but I would especially advise it now considering that interest rates are climbing,” he advises.
As tempting as it is to finance the entire purchase through debt, Goslett recommends saving up towards the purchase to minimise the debt. “Homeowners need to remember that the more debt they take on, the higher their monthly repayments will be. To make the homeownership costs more affordable each month, take time to save up towards a deposit as well as the transfer duties and bond registration costs,” he recommends.
At a minimum, Goslett cautions against taking out a 105% home loan if you are a first-time buyer who has not saved up for the upfront bond and transfer costs. Those who do take out a 105% home loan are advised to pay that extra 5% off as quickly as possible to avoid racking up interest charges on over the span of the loan term.
Homeownership affordability mindset
Homeownership can also become more affordable when buyers view the purchase as a step towards a bigger home. “Think about it as climbing the property ladder. The first purchase does not need to be your forever home but can be roughly a five-year investment towards a bigger home. The key here is to find a home that you can afford to pay extra on your monthly instalments so that you can increase your profit margin when you later sell,” he suggests.
To make homeownership more affordable, it can also be helpful to view the expenses as contributions towards future wealth. “Because property is an appreciating asset, the monthly repayments go towards something that is appreciating in value over time. Keeping this in mind can make it a little easier to pay the monthly instalments. Speaking to a local property practitioner will help to stay informed on housing values as they grow in your area and can also keep you motivated to keep up with the repayments,” Goslett concludes.
Writer: Kayla Ferguson