Why it makes sense to buy your own home

Private Property South Africa
Sarah-Jane Meyer

Freedom from paying rent is just one good reason for buying your own home.

The latest FNB House Price Index shows that more mortgages are being granted at present than in the recent past, and that the gap between supply and demand is getting smaller. This could be an indication that the market is on the point of changing from favouring buyers to being kinder to sellers, making this a very good time to buy a home of your own.

Wealth creation

Owning a home is the cornerstone of personal wealth for most people, because whatever you are paying for your accommodation is also helping you to acquire an asset that increases in value. In addition, you can borrow most of the money needed to acquire a home and retain the profit on the whole purchase price if you decide to sell.

First time buyers who earn between R3 501 and R22 000 a month have the added advantage of being able to apply for the government's Finance Linked Individual Subsidy Programme (FLISP) subsidy. This can significantly lower the cost of owning a home.

A paid-up home also assures you of a more secure old age, and the property can be left to your heirs as a valuable inheritance, in turn providing them with a solid foundation in life.

Rent vs bond repayments

Another advantage of buying your own home is being able to contain your accommodation costs to a large extent instead of having to budget for annual increases in rent. Rental increases generally range from 4% to 10% a year, so your accommodation costs will increase accordingly if you are renting.

Monthly bond repayments, on the other hand, are fixed for the lifetime of the loan, which can be up to 30 years. Even if interest rates increase over that period the monthly instalments are unlikely to increase by as much as 10% - or even 4%.

Equity and collateral

Equity refers to the difference between the market value of a property and the amount you still owe to the financial institution that holds the mortgage. Once you reach equity, you can use your property as security to raise money to start a business, invest in more property or pay for further education for your children - or yourself.

If you have an access bond facility on your mortgage loan, you could use this to finance big ticket items such as a new vehicle. Interest rates on vehicle finance plans are usually much higher than bond interest rates, so a mortgage access bond is often a preferred way of borrowing cash to finance vehicles.

Before taking this step, however, ensure that you know what interest rate you’ll be paying on the new amount and what the full costs are. It might also be advisable to ask a bond originator to help negotiate the best possible rate.

Security of tenure

Owning your own home means you don’t have to worry about being obliged to move at an inconvenient time, or when you can’t afford it. If you are renting, there is always a possibility that your landlord will decide to sell the home you are renting, or may want to occupy it himself at the end of the lease agreement.

Free agent

As a home owner you are free to implement the style of renovations, décor and garden design you prefer. This is often a bone of contention when renting, and any alterations you make to a rental property will usually have to be reversed when you move out.

Benefits to society

A high rate of home ownership is considered to be indicative of an economically free society where investment, job creation and prosperity are on the rise. Tax revenues from home ownership can also increase to fund ongoing improvements for the benefit of everyone in a society, for example, enhanced health and other social services, access to education and protection of the environment.

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