Knowing how to recognise the right home when you find it and make an appropriate offer can be tricky if you have no previous experience, and navigating the seemingly complex process of getting bond approval and taking transfer of ownership can be stressful. But careful preparation will turn a possible nightmare into a dream come true.
Most first-time buyers require a home loan, so before you start house hunting, you need to find out what type of home you can afford. It’s wise to be conservative so that future interest rate increases don’t upset your budget. You also need to be sure that you have enough money left over after your monthly bond repayments, to cover any unexpected expenses.
Questions to ask:
• What mortgage finance amount do you qualify for? A bond originator will be able to help you with this and will also be able to shop around among all the banks for the most favourable interest rates and other lending conditions.
• What monthly repayments can you afford? A number of online calculators are available.
• Do you have cash for a deposit, as well as legal fees, bond fees and transfer costs?
• How much can you spare from your monthly budget for additional expenses like sectional title levies, rates, insurance, repairs and maintenance?
The government's Finance Linked Individual Subsidy Programme (FLISP) subsidy for first-time buyers can significantly lower the cost of owning a home. This is a once-off subsidy and amounts provided range from R27 960 to R121 626, depending on individual circumstances.
FLISP subsidies are available to all first-time property buyers who:
• earn between R3 501 and R22 000 a month;
• have already received approval for a home loan;
• are South African citizens; and
• have at least one dependant.
Visit https://www.flisp.co.za/ for more information.
Once you know your price range, it’s time to decide what type of home would best suit your needs – sectional title unit or freestanding house. If you buy a freestanding or a cluster house, you are solely responsible for maintaining the property. Sectional title units are often more affordable than freehold houses, because you pay a monthly levy that covers your home insurance and your share of the general maintenance of the common property for the whole complex.
Sectional title questions to ask
• What is the financial position of the sectional title scheme? If the finances are in disarray you could find yourself responsible for servicing existing debt. Prospective buyers are entitled to access such information from the body corporate or managing agent, and you should ask to see the minutes of the last annual general meeting to assess the scheme’s history.
• What are the monthly levies, and what do they cover? For example, management and maintenance of the complex or building, and municipal rates and taxes.
• Are there any plans for future renovations to common property which new property owners may be required to contribute towards?
• What does the body corporate insurance cover? For instance, units are usually insured for damage from fire, lightning and explosions, along with damage to permanent fittings such as geysers and walls.
• What are the body corporate rules and regulations? These could include the keeping of pets, allowable noise levels, and behaviour of children and tenants.
When it comes to deciding which area you want to live in, the general rule is to buy the worst home in the best neighbourhood. After all, you can always upgrade a property, but improving the character and safety of a neighbourhood is beyond the scope of most people.
Look for zones with rising property prices, employment growth, and other indications the area is thriving. Avoid neighbourhoods with an usually high number of homes for sale - this could be a sign of a depressed local economy or that residents are leaving due to high crime levels or unwelcome forthcoming developments.
Properties close to good schools, public transport, shops and other amenities are more desirable than those in outlying areas, where homes generally take longer to sell.
Your dream home
There is a good chance that your first home is not going to be perfect, but it should be the right home for you and your circumstances. Draw up a list of priorities, as well as items that are nice to have but not essential. A double garage or a swimming pool may be desirable, but an additional bedroom or bigger garden may be more important.
Questions to ask:
• Is there potential for change? A property might meet your current requirements, but as a medium to long-term investment, you should choose a home that can grow with your changing needs.
• Is the price fair market value for the area? Compare with recent sale prices in the neighbourhood.
• Are there any hidden defects? If you are unsure of anything, ask a professional contractor to inspect the property and provide a report.
• What fixtures could need attention in the near future? Check the condition of the roof and flooring and try to estimate when these will need to be replaced. Knowing the expected remaining lifespan on expensive items can help you plan for the future and could affect the offer you make.
Long term investment
Keep in mind that buying a property is an investment and a long term commitment that could affect your financial well-being for the rest of your life. To ensure you make the right decision, you need to take the time to weigh up all the available options before putting in an offer to purchase.