A millennial’s guide to buying your first property
Purchasing a house is a huge achievement. Especially for millennials who are still figuring their lives out, moving up in their careers, purchasing cars and starting families. All these life-changing decisions can make buying a house seem like a far-fetched dream.
But, even for millennials, there are effective ways to buy a house in Cape Town or any other city that may spark your interest. So, if you’re interested in knowing how you can afford property in South Africa as a millennial, read the article below.
Think about how you can afford a down payment
In all honesty, with South Africa’s economy being the way it is, it’s unrealistic to think that South Africans are financially able to buy a house in cash. Apart from trying your luck and winning some extra cash, saving on your down payment is, unfortunately, your best option.
Saving money, especially for a large purchase, can be challenging. But, the most effective way to make things easier for yourself and your savings goal, is by having your savings automated. You may be rolling your eyes, thinking about how this has been said too many times by financial bloggers, but it does work. Having a fixed amount that’s deducted from your main account to your savings account can take you even closer to achieving your goal. But, if you have been automating your savings, there are a few other steps you can take to cut corners and add more money to your savings pool.
For example, you can;
- Start by paying off all your debts as that can help relieve the financial pressure. Once you have settled your accounts, you can put that money towards your deposit.
- Cut down on expenses. This may be difficult, but it is an efficient way of saving more money. Usually, people don’t realise how much money they spend on items that they don’t necessarily need. These items start adding up and end up costing an arm and a leg. A helpful way of cutting down your expenses is by making small changes gradually.
This means subtracting a small amount, for instance, five percent of all your variable expenses. If you’re able to, you can increase the percentages once you start getting comfortable with living with less. By making those small, insignificant cuts to your budget, you are able to put that money towards your savings. It may seem like a little, but when you calculate it, it does make a difference once added to your initial savings amount. If you are struggling to cut expenses, the first step is to start tracking your finances. Tracking your expenses can help you to determine where you may be wasting money and what you know you can live without.
- Lastly, don’t disregard “free” money. Apart from the lotto, if you get “free” money, either from your tax returns, contestant winnings or inheritance, rather save the money instead of splurging it on something you don’t need.
And remember, don’t be too hard on yourself. Saving to buy a property is an expensive endeavour; it won’t happen overnight.
Keep additional costs and fees in mind
Buying a house is more than your monthly repayments from your home loan. It comes with a few once-off payments such as; transfer duties, a deposit, conveyancing fees and deed registration fees. Those are all the expenses you need to budget for. And depending on what additional features your home may have, you may need to get building insurance as well. Building insurance, which is also referred to as home insurance, covers unknown expenses that may come in the future.
Shop around and know exactly what you’re buying
Now it’s time for the stressful part, finding your dream home. Although there will be plenty of houses on the market, it’s important to know what you want and need from your home. When shopping around, don’t go alone as you will need another pair of eyes to help you make your decision – preferably ones that are unbiased. While shopping for your dream house, here are a few things you need to consider:
- Which area are you interested in living in?
- Decide on what your deal breakers are. For instance, are you looking for a house that has no structural issues and damages, or are you comfortable with purchasing a house that requires minimum repairs?
- Do you need a house closer to a mall, public transport terminal or a school for your children?
- Is it big enough, and will your furniture fit?
- Will you have enough space for you to extend your home in the future, should the need arise.
- Take note of any telltale leakage or faulty appliances.
Use an agent
As you can imagine, buying a house is a huge deal; it’s not easy. The best way to lower the burden is to have a real estate agent on your side because agents know what to look for, and they’re great at negotiating. This can be a stumbling block for you, as this is your first property and sellers can be demanding at times. Agents are trained for this and will ensure you get the best out of your deal. So, take a step back and let the estate agent handle the whole process. You will avoid a lot of stress from this.
Know your credit score
A rule of thumb when it comes to your credit score is to check it every year. Knowing what your score is, is vital, as lenders you will be approaching for a home loan will want to take a look at your credit record. This will tell them how you use credit and if you are a reliable payer.
Unless you win the American lottery jackpot, buying property for cash is unattainable without the help of a home loan. So, make sure you have a high credit score, not only for the opportunity to get pre-approved for a loan but, it also works in your favour in getting the best interest rates. If your credit score took a hit in the past, you could still repair it by paying on time, paying at least the minimum instalment, and making sure your credit utilisation is low.
Apply for a home loan
In an ideal world, you would be able to put down cash for your home. However, that isn’t the case for most South Africans, and this is why a home loan is beneficial. You may be wondering why it’s advisable to apply for a home loan after you’ve shopped around for a home. Well, although it would make sense to obtain the financing first, at the beginning stages, you won’t know how much you need in order to buy your home. So, to be on the safe side, make sure you apply for a home loan after you have an idea of what you’re looking for.
Are you ready to take the leap?
Although this may seem like a daunting process, once the sale has gone through, you will be exceptionally proud of yourself. And, you have every right to be; you will be a homeowner, and you’ll be able to start the next chapter of your life. So, let out a sigh of relief, knowing that you’ve done a responsible thing that your future self will be thankful for.