Five ways for first-time buyers to get into property this year.
Category Advice
With the raising of the transfer duty exemption threshold to R1.1 million with effect from the 1st of March, there are plenty of reasons for first-time buyers to get into property this year.
It is also still much easier to obtain a favourable mortgage loan to finance a first-time property purchase. Aside from possibly not having to pay transfer duty, qualifying buyers could also still secure a home loan of up to 105% which includes costs, depending on the bank and property.
There are plenty of ways in which first-time buyers can get into the market, for example:
Buy your own home:
Investing in your own property is not only a way to secure the roof over your head, but property investment builds long-term wealth. You can finance this purchase and while paying off your home loan, the property will likely further appreciate in value. Once paid up, you will have an asset of considerable value.
Become a Rentvestor.
This means you can purchase a home in an area that you can afford, while renting in a location which might be more convenient. This could be a great way to still build up property wealth as you can rent out your investment property and earn a rental income which can help finance most of the costs.
Buy a fixer upper.
You might be able to find an older or smaller property at a lower cost which offers great potential for renovating and extending the property. Minor cosmetic upgrades such as new floors, cupboard doors, tiles and sanitaryware is often a more affordable way to update a property and could add to your enjoyment of the home while adding value to the property.
Purchase in an area with lower price points
By doing this, you might find a great property in an area that you might not otherwise have considered. Be sure to check the amenities in the area and that there is access to basic facilities and schools if you have future plans to start a family. These areas also often have strong rental markets for those who want to buy here and live elsewhere.
Buy in a new development.
Buying off-plan usually allows you to purchase a property at a fixed price which, by the time it is completed, will usually already have some value. There are normally mortgage loan packages available for qualifying buyers. These properties are also usually quite popular for rental investments.
Entry and exit costs associated with property can be steep. Buyers must always ensure they do their due diligence in terms of investigating the area, the property and price.
Also ensure you are financially prepared for the costs of property ownership, not just the monthly mortgage payments, but added costs such as property taxes, utilities, insurance, maintenance and so on.
First-time buyers should consider these 6 reasons why paying a deposit is important when buying property:
1. It demonstrates commitment towards buying the property
A deposit demonstrates that clients have the financial means to make the purchase and are comfortable to take on some level of risk until the deal closes. It's also an excellent way to further prove that you are ready to take on the costs that come with home ownership.
2. It increases the strength of an offer/ or the chances of having the offer accepted
Paying a deposit will also improve client's chances of having your home loan application approved by the bank and will place them in a better position to negotiate for more favourable terms.
3. It reduces the risk of lending
The benefit of paying a deposit when applying for home finance is that clients are seen as providing equity into the deal thus reducing the bond amount required. This views the deal more positively by the bank and will also reduce the clients' instalment as they are borrowing a lower amount. By reducing the amount you need in a loan, you are also reducing the amount of home loan interest you pay over time.
4. It increases the customers' ability to negotiate a better rate
Putting down a deposit will not only improve the chances of having a home loan application approved but will also place the client in a better position to negotiate for a more favourable interest rate. This further reduces the amount of interest a client will pay over the term of the loan.
5. It allows saving on interest over the term of the loan and lowers monthly repayments
Putting down a deposit for a home loan will further reduce the interest rate and monthly instatements allowing clients to repay faster before the term completes. When paying a deposit, the overall value of your loan will be smaller meaning that you will be able to pay it back sooner.
6. Saving for a deposit mentally prepares clients for a home loan repayment
Saving for a deposit sets the tone of what's to come. It is a great practise run for the commitment that will be required to ensure that clients have the required funds and mind-set to fulfil the obligations of monthly repayments in the long term.
Finally
Now is the right time to get into the property market. We encourage first time home buyers to look carefully to assess their circumstances and work out how much they can afford to pay back each month.
Extract from Property 24
Author: Extract from Property 24
