Whether you are a first-time homebuyer or a family wanting to upscale to accommodate the kids, here’s everything you need to know before you make one of the biggest purchases in your life
WORDS: MARANA BRAND – PHOTOS: SOURCED
n the face of record-low interest rates and bargain property prices, anyone from first-time homebuyers and even lifelong tenants are getting the wheels turning to buy a property. Adding to the house-hunting frenzy is favourable lending criteria and high approval rates by the banks.
But where does one begin? First establish what type of property you want, where you want to stay, what are non-negotiables and what you are prepared to pay.
How much space do you really need?
Bigger families, and those hoping to start a family in the future, would do well to invest in a home that offers enough space for everyone to co-exist comfortably, says Barrie Swart, Gumtree’s head of operations. “It’s also important to remember that smaller homes tend to be more affordable – the more square meterage your home covers, the bigger your monthly bills. Give this a little thought before making your decision.”
What are your deal‑breakers?
For some, having a big kitchen with loads of storage space is a must, while others may not want to compromise on the size of garden their new home offers for children to play and the family to spend quality time outdoors, says Swart. “If you’re after some peace and quiet, proximity to busy streets, stadiums or nightclubs would be red flags. Make a list of the deal‑breakers and what you’re willing to compromise on and give it some thought before signing on the dotted line.”
Golden oldie or brand new?
“If you have the time, patience and spare cash to turn an older home with a solid structure into the home of your dreams, then by all means, go for it! However, not everyone has the time or patience for renovations and upgrades,” says Swart. Having to retile a bathroom or replace dated kitchen cabinetry seems simple, but can quickly become stressful if you aren’t really ready to take on a project that may require a lot of your time, energy – and money.
It’s also important to understand the difference between an old and a heritage home if you are planning extensive renovations, says Claude McKirby, co-principal for Lew Geffen Sotheby’s International Realty in Cape Town’s Southern Suburbs. “The general rule of thumb is that homes built before 1990 are considered older homes and if it’s older than 60 years it could well be a heritage property in which case there might be significant restrictions regarding the alterations you are allowed to make.”
The best location
Property value is an important aspect when it comes to selecting the neighbourhood you would like to live in. “Other factors to consider include how safe the area is – you can chat to residents of the neighbourhood, or opt for gated communities or security‑controlled complexes – and whether there are good schools nearby for children to attend. Having easy access to main roads and freeway on‑ramps will also save you from being stuck in traffic,” says Swart.
Check out the ‘hood
It’s important for buyers to remember that when they are purchasing a home, they are not only buying the specific erf and the property itself, they are also investing in the neighbourhood, McKirby says. “Buying a home in a suburb that’s deteriorating or that has increasing criminal activity can be a costly mistake and significantly diminish return on investment. Look for signs such as boarded up properties and a high number of vacant homes or shops in the area.”
Consider the neighbours
The Covid-19 pandemic has taught us many things, including the real value of great neighbours – and the true awfulness of bad ones. And the best time to find out which kind you’re likely to have, says Gerhard Kotzé, MD of the RealNet estate agency group, is before you commit yourself to the purchase of a new home.
Homebuyers’ first step should be to ask sellers how they like their neighbours and their lifestyle, and whether they’re running any sort of business from home that brings additional traffic, raises noise levels or could be a security risk. “Homebuyers who are really concerned should also make a point of viewing any homes they are interested in buying a few times, on different days of the week and at various hours of the day, to assess the situation for themselves,” says Kotzé.
You might not mind the occasional noisy weekend party next door, especially if the neighbours have been courteous enough to forewarn you. But loud music emanating from their home every day and night is very likely to be a serious problem, especially if you are trying to work from your home office. “Similarly, you might not previously have been bothered by the sounds of children playing in the garden, but could be quite overwhelmed by the all-day noise and traffic if your neighbours are running a day-care centre,” he says.
Other irritations can be dogs that bark incessantly, trees that cast welcome shade in one neighbour’s garden while blocking light from another’s windows, revving engines and noisy machinery.
Now for the home loan
The key to ensuring that your application is successful starts with understanding what the banks are looking for,” says Rhys Dyer, ooba Group CEO. The following may help with approval:
Know your credit score. Your credit score is one of the most important factors the banks consider. To qualify for a bond, you need a credit score rating of 600 or more. “A healthy credit score indicates to the bank that you are able to meet your debt obligations on time each month,” says Dyer. “The better your credit score, the better your chances of securing a home loan, and at a low interest rate.”
Get pre-approval. The pre‑approval process involves checking credit scores and affordability to determine what the optimal price bracket is for your home purchase, and therefore what home loan amount you qualify for. The process can be completed in minutes by using free online tools or talking to a home loan consultant. Once completed, you are given a pre‑approval certificate valid for 90 days, which proves to an estate agent or seller that you have the funds necessary for the home purchase. “Pre-approval doesn’t mean that the bank has approved you, but it does greatly increase your chances,” says Dyer.
Save up for a deposit. Although banks are increasingly approving 100% home loans (home loans without a deposit), you can significantly boost your chances of being approved by putting down a deposit of around 10%. “Not putting down a deposit doesn’t mean that your application will automatically be rejected, but it is a sign of your commitment to the purchase and demonstrates your capacity to save – the higher your deposit, the less of a risk you are,” says Dyer.
Get your admin in order. One of the key factors when applying for a home loan is the administration, which Dyer says is pertinent to being approved. “Much paperwork such as bank statements and proof of income is required,” he says. “Working with a team of experts such as a home loan originator, can ensure that all your paperwork is right the first-time round. This saves you time and avoids any unnecessary delays.”
Apply to multiple banks. “The most effective way an applicant can ensure that their home loan is approved is by applying to multiple banks. More applications increase the chances of approval (at the best possible interest rate), and this is achieved by using a home loan originator such as the ooba Group,” says Dyer.
What else to consider
Securing the purchase price, be it by way of a cash payment or bank finance, is not the only financial expense that you need to consider when buying property, says Lethabo Mashishi, associate and conveyancing attorney at Adams and Adams. “There are additional costs that should be kept in mind, and budgeted for upfront.” The following costs are common when you buy a property:
- Property transfer fees. Once the sale agreement is concluded, a transferring attorney is appointed to facilitate the process of transferring the property from the seller to the buyer. The buyer has to pay the transfer fees before registration of the transaction in the Deeds Office, Mashishi says. There are transfer fee calculators online, but on a R2m house, transfer fees are roughly R33,000.
- Deeds Office fees. This fee is for the registration of the transaction and amounts to around R1,500 on a R2m house.
- Bond registration fees. When you need finance to buy a house, the bank will register a mortgage bond over the property in the bank’s favour. “The bond registration will take place simultaneous with the registration of the transfer of the property,” says Mashishi. “A bond registration attorney, appointed by the bank, attends to this process and charges a professional fee for services rendered.” On a R2m house, this will roughly be R33,000.
- Transfer duty. This is tax levied by SARS based on the value of the property purchased and the government determines the scale at which transfer duty is calculated. On a R2m house, it could amount to about R50,000.
- Property insurance. “Banks always require that the financed property be insured. This is to protect their interest in the security they hold (the bond) should anything happen to the property,” Mashishi says. The homeowner can, however, choose their own insurer and negotiate their own terms.
“A sale agreement usually stipulates that all risks and benefits in the property pass to the buyer on date of registration in the Deeds Office,” he says. This means that from date of registration the buyer becomes liable for all expenses relating to the property, which include:
- Municipal rates and taxes
- Electricity, water and sanitation charges
- Levies that are charged when a property forms part of a sectional title scheme or if a property is situated in an estate where a homeowners’ association exists
Also remember that owning your own home comes with the responsibility and cost to maintain the property.