Buying a house in your 20s: Don’t just follow the herd
Interest rates are still the lowest they’ve been in 50 years, bond repayments are less than rent in many areas and all your friends are buying property, but as a young person, you still have to be sure that homeownership is the right move for you.
Gerhard Kotzé, MD of the RealNet estate agency group, notes that the Covid-19 pandemic has also largely removed two other things that have been obstacles to early homeownership in recent years: wanderlust and the need to relocate for work.
“The huge increase in corporate acceptance of remote working means that many young people no longer have to worry that they might need to move towns to stay employed because as long as they have a good internet connection they can do just that from their current homes.
“On the other hand, opportunities to become a ‘digital nomad’ and travel the world with your work laptop in hand have been severely curtailed by the pandemic, and with international travel set to become much more expensive, are unlikely to be as widely attainable in the future as they have been in recent years,” he said.
The recent surge in first-time home buying among people in their 20s is not that surprising. “However, there is much more to it than just following a trend among your peers. As a young person, you need to think really carefully about your personal situation before making a commitment that could profoundly affect your future.
ALSO READ:
Things to inspect before buying a house
“If you decide to save up for a 10 per cent or 20 per cent deposit so that you can keep your bond costs down when you buy your home, you need to think realistically about how long that might take and what other goals might be affected.
Working from home, you will probably not find it a big sacrifice to give up takeaways or new shoes or fancy coffees. But what if you had been planning to pay for some study courses to improve your qualifications? Would you be prepared to put that goal on hold to save for a deposit instead?”
You might decide to go ahead with purchase with only a five per cent deposit in hand or even to accept one of the 100 per cent loans currently on offer from the banks for those with good credit records. Before you do, you need to assess the risks involved.
“It is usually better to keep your bond low and then use any spare cash you may have to pay it off as fast as possible to build up equity.”
Young people need to anticipate the total costs of homeownership and work out if they will be able to afford them without putting a strain on their finances every month.
“First-time buyers are often surprised by how much it actually costs to run a home, especially if they have been renting and many of these costs have previously been carried by their landlords.
“Young people should not be driven by fear of missing out. Interest rates are likely to stay low for at least the next two years, while home prices continue to rise very slowly.
“This is a large investment that is going to have a long-term effect on your finances, so you shouldn’t make it in a rush. Slow down to plan properly and buy when you’re ready.”
Have a story?
Contact the newsroom by emailing: Thelma Koorts (editor) brakpanherald@caxton.co.za or Stacy Slatter (news editor) stacys@caxton.co.za
Remember to visit the Brakpan Herald on the following social media platforms:
Follow us:
