Noteworthy tips for all 1st time buyers

ADVISING first-time buyers about home financing is a serious business and is taken seriously by the home loan consultants at BetterBond Home Loans, South Africa’s leading mortgage origination group.

“We realise that the information which many first-time buyers need goes well beyond what their home loan options might be. They often don’t know, for example, if they have budgeted properly for a home purchase and if they will be able to afford their home loan repayments every month,” says BetterBond CEO, Shaun Rademeyer.

Others may need to know how much cash they will require to cover the “hidden” costs of a home purchase such as transfer duty and bond registration costs, and yet others may not have allowed for the ongoing costs of home ownership such as municipal property rates, estate levies and maintenance. But the BetterBond loan consultants are trained to provide all this information and more, and that can really smooth the way to a successful home purchase.

“The main reason we do this is that we want people’s homes to be the foundation of their future wealth, not a financial burden that swallows up too much of their income every month. It is also why we recommend that all buyers and especially those entering the market for the first time, should be pre-qualified for a home loan before they start looking for their new home.”

Getting pre-qualified, Rademeyer notes, enables prospective buyers to focus their home search on those properties they know they can comfortably afford, instead of being tempted to “stretch” themselves financially to buy something too expensive. It also increases the likelihood of their offer to purchase being accepted, because the seller is reassured that they are financially capable of buying his property. Meanwhile, he says, homebuyers calculating the ongoing costs of home ownership should not forget about the premiums for at least two types of insurance that will probably be new to them, the first being homeowners insurance (HOC), which covers the “bricks and mortar” of the home itself at replacement value; that is, the amount it would cost to rebuild should it be completely destroyed, say by fire or flood.

“Most homeowners simply allow the premium for this insurance to be debited to their home loan account, but it is worth noting that paying it separately when it falls due could mean a long-term saving of thousands of rand in interest. In addition, a borrower does not have to buy this insurance from the bank that gives him a home loan, as long as he can prove that he has enough cover.”

And similarly, Rademeyer says, the lending bank may insist on the borrower having what is called “bond insurance”, which is actually credit life insurance to cover the outstanding amount of the bond in the event that the borrower dies or is permanently disabled, but the borrower is also free to obtain this insurance wherever he likes.