The interest rate on home loans is the lowest it’s been in decades, and how many times have you been told that it doesn’t make sense to rent for years and years when all you’re doing is paying off your landlord’s bond?
So, should you take the plunge, buy a home and start paying off what will hopefully be a great investment? Here are some things to consider.
Owning costs more than you think
Ever heard of that luxury villa called Costa Plenty? It’s true! When you buy a house, you start paying before you even turn the key in the front door. You have to pay transfer duty on the purchase price if it’s more than R1 million (not applicable if you buy off-plan in a new development), and you have to pay transfer costs, which includes the conveyancing attorney’s fee plus deeds office fees and other disbursements. You’ll also have to pay the bank a bond registration or initiation fee.
It doesn’t end there… Once you actually own the property, you need to budget for your home loan repayments and you also have to pay for water, electricity and municipal rates and services. Then there’s insurance: not just for the building but also a life insurance policy to cover the outstanding loan amount if something happens to you.
Have we mentioned maintenance and repairs? Levies if your home is in a sectional title development like a block of flats or a housing estate? The list goes on.
The interest rate might change
Interest rates are low now, but they might not be in the future. Most home loans are linked to the so-called ‘prime rate’, which is adjusted by the Reserve Bank at least six times a year. If the prime rate goes up, the interest rate on your bond will go up and you’ll have to pay more each month.
Selling and moving
Moving is not easy when you own a property. You have to hang onto it for a few years to recoup the costs you outlaid in the first place, and when you sell you have to factor in estate agent commission and other costs.
On the flip side, renting is flexible. Depending on your lease, you can give a month’s notice and be out of the door without a care in the world. But this plays both ways: your landlord can also give you notice if he or she wants to…
These are just some of the factors to consider, but the most important might be how you feel about it. Owning suits some people and renting suits others. If you’ve got your heart set on a dream home, you’ve done your budgeting and you can afford it, then go ahead and buy. Owning property can be an exciting and rewarding journey. But if you want to keep your options open and pursue other life goals or investments, then the roof over your head doesn’t have to belong to you to do its job.