Are you ready to buy your first property?
Category Property Advice
With international travel and nomadic ways of life being temporarily curtailed by the COVID-19 pandemic, an ever-rising number of millennials are showing an interest in property ownership. Thanks to the interest rate having been at a 50-year-low since July 2020, the idea of taking a loan to buy a property has never been more appealing. Before you sign on any dotted line, however, it is important to weigh up the differences between being a homeowner and being a tenant, and decide which is right for you.
Factor 1: The financial implications of homeownership
The first step in deciding whether you are ready to be a homeowner is to look at what you can afford, and the best way to do this is to liaise with a mortgage originator. Take time and consider the financial implications of home ownership. On one hand, you will be paying off an asset that will be your own one day, rather than essentially buying someone else an asset. On the other hand, when you factor in paying rates, levies and other monthly expenses, homeownership can, in the short term, be more expensive than renting a home.
Factor 2: Your long-term plans
Buying a home means making a commitment to a property for at least a few years. Many people will resell their property without waiting for the full 20-year home loan period to be up, but you are unlikely to get a return on your investment if you sell within the first five years.
While COVID-19 may be limiting your movements in terms of travel and living the "digital nomad" lifestyle for now, this will not always be the case. On the other hand, if you decide to travel, you could always rent out your property, which is likely to go a long way towards covering your monthly bond instalments.
If you are planning to move overseas (or to a different city within South Africa) permanently in the next three to five years, renting may be a better option than homeownership for you. If you are keen to buy now, waiting may seem like an inconvenience, but giving yourself another couple of years to save up a sizeable deposit will work to your advantage when you have relocated and it is time to buy.
Factor 3: The responsibilities that come with homeownership
As a tenant, there are certain things you don't have to worry about. For example, if a geyser breaks or an automatic gate stops working, it is your landlord's responsibility to organise and pay for the repairs. Anyone considering becoming a homeowner should understand that these maintenance issues will now be their responsibility. Ideally, you should have a little extra money tucked away for such emergencies. You will also need to take care of all routine maintenance jobs such as gardening, caring for the pool and keeping your home looking as good as it did when you bought it. If this doesn't sound like the type of responsibility you want to take on, being a tenant may be better suited to you for now.
Factor 4: Doing your research
Purchasing a property is a very different exercise from signing a one-year lease. If you sign a lease and then decide that the area isn't right for you, you can simply not renew the lease at the end of the year and move. When you have bought a property, on the other hand, there is far more involved in making a move. In short, you're not ready to buy property until you've done thorough research into the area in which you are thinking of buying and made sure that it's right for you.
Whether buying property or renting property is right for you, the CSi Property Group has your needs covered. The first step in any real estate journey is to find the right property partner, so contact us today.
Author: CSi EUF