With 2016 predicted to be a financially tough year, those who have aspirations to get into the property market will need to take stock of their financial position and assess whether they are on the right track to achieve their goal, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
“The expected interest rate hikes, along with the rising price of electricity and food will place further pressure on potential homebuyers this year. Added to this, financial institutions have already started to increase the cost of lending and reduce their risk by increasing the percentage of deposits required by bond applicants,” says Goslett.
“With the more stringent requirements that are being introduced by banks, it is becoming increasingly important for would-be homeowners to prepare financially and increase their affordability ratio as much as possible. This can be done by reducing debt levels where possible and putting money aside in an interest-bearing savings account.”
According to Goslett, even a small additional payment of R100 a month can make a big difference when it comes to reducing debt levels over time and showing progress. “Setting savings aside will also create an emergency fund that will help the prospective homebuyer to stay out of potential future debt,” advises Goslett.
He notes that financial planning and preparation doesn’t only apply to aspiring homebuyers, but to current homeowners as well. “A homeowner might want to add on to their home or renovate, which may require applying for additional finance. Regardless of whether you are an aspiring homeowner or current homeowner, taking the time to assess your financial standing will give consumers the opportunity to introspectively examine what needs to be done to attain their financial objectives,” says Goslett.
When doing a financial review, Goslett suggests that consumers look at three aspects in particular, namely their resources, goals and priorities. Over the course of a year there could be numerous major life changes that will have an impact on the consumer’s financial situation and how they need to adjust their plan to meet their goals. “
“A major life change such as a marriage, birth of a child, a death or starting a new business venture, will definitely change the consumer’s needs and perhaps the time frame required to purchase a home. A growing family who are living in a home that no longer meets their needs will want to purchase a home as quickly as possible, which would mean that more money would need to be set aside for the deposit and other costs associated with a property transaction. Consulting with a professional financial planner will be very valuable to those who require strategies for time-sensitive objectives,” says Goslett.
He adds that a tax consultant will also be able to guide the consumer as to how any life changes, such as marriage, may have impacted their tax status. “Having all their financial affairs in order will also make it far easier for consumers to submit an annual tax return. Having a record of receipts and financial documents will provide the consumer will valuable information regarding their spending habits and how much is spent on deductible items. This will also assist them in assessing whether they are paying too much for expenses such as insurance, flexible spending accounts, cell phone contracts and even investment fees,” says Goslett.
It is always beneficial to monitor a financial plan and have benchmarks in place in order to measure its success. “If there are performance perimeters in place it will be easy for the potential homebuyer to assess their financial plan and make adjustments if necessary. Making the required changes should be done as soon as possible, to ensure the best possible outcome in the shortest amount of time,” advises Goslett.
He notes that consumers need to be aware of how they are spending their money and what needs to be implemented to achieve their homeownership goals. “Ideally a potential homebuyer needs to take the time to examine their life goals and determine what course of action they will need to take to attain these objectives. With the right plan in place, nothing is impossible,” Goslett concludes.