In Episode 10 of the Change in your Pocket series, we give you practical tips on how to go about saving for a deposit on your first home.
– Video supplied by BrightRock
Welcome to The Change Exchange where we are discussing the ins, outs, trials and tribulations of owning your own home.
When buying a home, most banks require at least a 10% deposit when applying for a homeloan. In addition to this deposit, you would have to have saved up money for the transaction costs.
Based on the R1 million example we used in previous episodes, this means you’d have to have about R130 000 saved up. Now, this may seem like a lot of money to pull together, but if you are unable to save towards a deposit for your home, there’s a strong likelihood that you can’t afford it.
Remember: not only are you going to be paying a mortgage for many years, but you’re also going to incur monthly running costs as well.
A good strategy is to calculate how much you will be spending once you’ve bought your home. This will include your mortgage and other costs, like insurance, rates, levies, electricity and water.
If you’re currently renting, save the difference between your current rent and your future homeowner costs.
In the example we gave of running costs of a R1 million home, home-ownership would cost you around R13 000 per month. If you are currently paying, for example, R9 000 to rent, then you need to be able to save an additional R4 000 per month towards a deposit. It would take you about two years to build up a deposit of R100 000.
This strategy helps you to adapt to living off a smaller busget once you have to service a bond. And it also helps you build up a deposit for that first home.