Generally speaking, children look up to their parents and approach them for advice on matters of importance. Buying a home is one such matter and parents can play a pivotal role in assisting their children on their path to home ownership.
Firstly, it’s important to establish why your child wants to purchase a home and whether or not they are being realistic about the property they want. Purchasing a home “because everyone else is” and enquiring about a R3-million cluster on a R10 000 salary are signs that your child needs guidance.
“Buying your first home is a big step, and also a very big financial commitment,” says Monde Motha, Channel Manager at FNB Home Loans. “Your child needs to understand that repayments will account for a big chunk of their monthly income, which may mean they aren’t able to afford additional expenses such as studying further or going on trips with friends.”
Have a plan
Not only is it a big financial commitment, it’s also a long-term commitment – which is why parents should discuss what plans their children have for their future. For instance, are they still planning on travelling and what will happen if they change jobs, or cities?
“If they don’t have a reasonable plan for at least the next few years, they possibly shouldn’t be committing to a 20-year-bond,” says Motha.
After establishing need, affordability is key to home ownership. Carefully go through all the aspects of home ownership that your child may not be aware of including legal costs, bond registration costs, a deposit as well as how they plan to finance their monthly bond costs.
It’s also important to teach your child that there are monthly costs over and above the bond. These include household insurance, levies (if applicable), municipal bills, electricity and water, as well as general maintenance. Showing your child your own municipal bills and household budget is a useful way of illustrating these costs. All in, it could well be that your child simply cannot afford to purchase the home they want.
Of course there are ways to get around this. You could suggest that your child sets their sights lower or brings in a housemate to help share the costs. You could stand surety, contribute towards a deposit or apply for a joint bond. The benefit of this is that your child should stand a better chance of being granted a bond. The downside is that you will be liable should your child default, which can negatively affect your credit rating too.
Advice from a Dad
Private Property’s Chief Marketing Officer Maziar Arsalan also suggests the following tips for young buyers on the brink of purchasing their first home:
Don’t take out the maximum bond you can afford – you still need to live, travel and enjoy life while you’re young
If you do not get the property you want, wait for the next one. There is no such thing as the dream house at all costs
Do not overestimate the amount of work you can do on a fixer-upper. When it comes to construction and renovation, many have failed as it requires skill and time
Always factor in another 10-15% for additional, unexpected costs
Shop around for the best possible interest rate. It will pay off over time
Ultimately it’s crucial that your child is well informed and fully understands all of the implications of home ownership before leaping in. As a parent who presumably has experience in this arena, you are well placed to guide your child successfully along this path.