It might not be easy, but it’s time for prospective homebuyers to start saving for a really sizeable deposit. So says Realty 1 International Property Group CEO Hano Jacobs, who notes that the average household debt to disposable income ratio has been stuck stubbornly at around 80% for the past two years – despite aggressive interest rate cutting by the Reserve Bank. “However, borrowing has declined substantially, so it is the fact that the cost of living has increased more than wages and salaries that has kept the ratio high. And with further energy, transport and housing cost increases on the way later this year, it is going to be even more difficult for most people to show that they have enough disposable income left to qualify for a home loan.” It will, of course, also make it more difficult to save money each month, “but prospective homebuyers need to keep in mind that having a sizeable deposit in hand will give them a definite advantage in negotiating for the best home loan interest rate, because the banks know that the larger the personal stake they have in their homes, the less risk there is of them defaulting”. And even a one percentage point rate concession can save you more in interest over the life of the home loan than the deposit you initially put down, he points out, and help you to pay off the home much faster. “It’s a case of making valuable sacrifices upfront to achieve a great advantage later on. “What is more, having a decent deposit to put down means you will need a smaller loan and have to commit much less of your disposable income to the monthly repayments. It will ensure that you have equity and help you to weather any future increases in interest rates and living costs.” So, how much to save? Jacobs says first-time buyers should aim for 20% of the purchase price, some of which they may then use to cover transfer duty, legal fees and other purchase costs. “This will be tough, because according to the latest figures from Absa, the average price of a small home is now around R844 000, so a 20% deposit would be about R169 000. But at the moment, time is on your side as house prices are only rising slowly, and the sooner you start saving the closer you will be to owning your own home.”