Smart strategies to prepare for a home loan

In recent years, South Africa has witnessed a series of interest rate hikes as the South African Reserve Bank (SARB) took measures to curb inflation. However, a notable shift occurred in September 2023 when the SARB decided to leave interest rates unchanged.

The potential for further reductions in 2024, if the inflation rate continues to decline, opens up new opportunities for aspiring homeowners, who need to make sure they are well-positioned to take advantage of these favourable conditions, says Antonie Goosen, principal and founder of Meridian Realty.

Goosen says aspiring homeowners need to stay informed and plan strategically in preparing to apply for a home loan.

“Keep a close eye on economic indicators and interest rate trends. With potential rate adjustments on the horizon, being informed will empower you to make strategic decisions regarding the timing of your home purchase.

He says it is important to strengthen your credit score.

“A strong credit score is crucial when applying for a home loan. Take proactive steps to improve or maintain your credit score by paying bills on time, reducing outstanding debts, and correcting inaccuracies in your credit report.

“You also need to save for a healthy down payment. While interest rates may become more favourable, having a substantial down payment can still positively impact your mortgage terms. Start saving early to secure a sizable down payment, demonstrating financial stability to lenders,” says Goosen.

According to Goosen planning to apply for a home loan means you often have to assess and adjust your budget to ensure it is realistic.

“Review your current financial situation and create a realistic budget that includes potential home ownership costs.

“With the mortgage payment factor in property taxes, insurance, maintenance, and other related expenses.

“You also need to explore all the home loan options available. Research different types of mortgages and lenders to find the most suitable option for your financial situation.

“Consider seeking pre-approval to better understand your borrowing capacity and strengthen your position during negotiations,” says Goosen.

He says having emergency savings is necessary and needs to be prioritised.

“Home ownership comes with unforeseen expenses. Establish or bolster your emergency fund to cover unexpected costs, ensuring you can comfortably manage your mortgage payments even in challenging circumstances.

“Also, engage with financial advisors to receive personalised guidance based on your unique circumstances. They can help you navigate the complexities of home financing, offering insights into optimal financial strategies,” says Goosen.

Finally, says Goosen, you need to lock in a favourable rate.

“If you decide to proceed with a home purchase, consider locking in a favourable interest rate when you secure your mortgage. This can provide stability in a changing economic environment,” says Goosen.

Goosen says by adopting these strategies, prospective homeowners can position themselves to navigate changing interest rates and secure a home loan that aligns with their long-term financial goals.

“As the financial landscape evolves, proactive financial management becomes increasingly critical. Careful financial planning today can pave the way for home ownership in the future,” concludes Goosen.