How to overcome First-time buyer jitters | Money has never been this cheap to borrow!
Category Advice
Once the Offer to Purchase has been signed, it's not uncommon for first-time buyers to experience anxiety after realizing that they have now locked themselves into millions of Rands in debt. As one of the biggest purchases one can ever make, it is entirely normal to experience this form of buyer's regret. To help ease their minds, there are a few considerations of which first-time buyers should remind themselves whenever they feel these waves of anxiety rush to the surface.
The first mistake buyers make is to think of the purchase solely in terms of the amount of debt they have taken on. Real estate is an appreciating asset. Instead of viewing it as an insurmountable mountain of debt, consider each repayment towards the home loan as an investment towards future wealth. First-time buyers must plan and budget accordingly from the very start of their 'perfect home search' so that they know they can always afford to keep up with the repayments.
One of the biggest concerns for first-time buyers is that they will fall behind on the repayments. The best way to eliminate this concern is for the individual to create a budget that he/she can stick to so that this never becomes a justifiable concern. Lower interest rates and transfer duties have improved everyone's chances of securing finance and property ownership.
Money has not been this cheap to borrow in a very long time. If you are going to buy, now is the time. You may find you are able to afford a bigger bond, which could put you in an area where a year ago you could not afford to buy. When you see your ideal home, you need to be ready to act. In many areas, there is limited stock, and the bargains get snapped up quickly.
On the other hand, where there is a large amount of stock on the market, our advice is to entrust your agent with a definitive list of your requirements. View as many homes as you need to and do not rush your decision; when you're ready, use the buyer's market to your advantage and make a reasonable offer - it may just be accepted.
But when will the interests rates change again?
Things outside of a buyer's control that could affect their ability to make their monthly repayment. For example, interest rates can change every two months when the MPC meets, with the next meeting scheduled for 6 April, just after the Easter holidays. Thanks to the Reserve Bank, interest rates are still the lowest they've been in 50 years at 7%, with bond repayments are less than rent in many areas
The best way to avoid unnecessary stress around this is to purchase within one's means and to leave room for a 0.25% increase. Historically, the MPC usually never hikes interest rates by more than 0.25% points at any given meeting. If there is a series of interest rate hikes, these usually only happen gradually which gives homeowners the time to plan and adjust their budget as necessary.
Have two months' salary set aside in a tax-free emergency savings fund
Having a contingency fund could also prove helpful in putting buyers' minds at ease about their purchase. Life is unpredictable. Things often break or suddenly need replacing, which can put financial strain on a household. Buyers might also find themselves temporarily unemployed during the span of their home loan. Having roughly around two months' salary set aside in a tax-free emergency savings fund can lessen the anxiety buyers may feel around keeping up with their repayments.
Author: Property 24 - Extracts
