Exercise financial fitness

Private Property South Africa
Lea Jacobs

A recent article on Sky News with the headline “Gym Fees Could Stop Mortgage Approvals” undoubtedly induced a few Brits to choke on their cornflakes.

It appears that new restrictions introduced under the Mortgage Market Review will force banks to increase the “intrusiveness” of checks conducted on those who are applying for mortgage finance.

The report states that buyers could be turned down for a mortgage because of their gym memberships, phone bills and pension contributions. As in South Africa, the new rules have been implemented in order to prevent banks and building societies from handing out loans to those who are unable to afford them.

While the British are still reeling in shock from this latest development, South Africans have become pretty used to the idea of having their credit commitments thoroughly checked out by banking institutions. Those who are determined to buy their first home or want to invest in a more expensive property have been cutting back on their debt in order to meet the strict criteria imposed by the Credit Protection Act.

It ain’t easy

Unfortunately, in most cases this is a fairly difficult, drawn-out process. As South Africans, we are used to having a great deal of debt. We have clothing accounts and furniture accounts … in fact most chain stores offer credit, and the debt trap is an easy one to fall into. Add to this a credit card and an overdraft, and things can start to become a little hectic.

Somehow we have become a “we want it all and want it all now” nation, which may be fine while salaries are on the up-and-up and interest rates are low, but it can create havoc when the economic tide starts to turn.

The adage, the best things in life are worth waiting for, comes to mind. Unfortunately, the longer it takes for those wanting to invest in property to realise this, the longer it will take for them to be in a position to buy a home.

Keep it under control

While the ideal situation may be to have very little debt, having large amounts of debt does not mean that all is lost. Those who understand that owning the roof over their head is far more important than a flashy car or designer clothing tend to go all-out to ensure that existing accounts are paid off and if not closed, then at least controlled.

While it may be true that banks have started to grant more bonds, this does not mean that they will be willing to lend a large amount of money to a debt-ridden individual. Simply put, they are barred from doing so and if caught, will face enormous fines running into millions.

The message is pretty clear – get your priorities right and start focusing on a long-term investment rather than a short-term “feel good moment”. Think about how your Rands and cents are spent and try to live within your means.

Nothing can compare to the feeling someone has when they are given the keys to their first home or move up the property ladder into a bigger, better property. The financial rewards associated with home ownership are enormous and those who make sacrifices today will reap the financial rewards in the future.

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