Buying a home: understand your running costs

Episode 9 of the Change in your Pocket series focuses on the running costs associated with home-ownership.

– 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 their first home, most people understand the implications on their budget of repaying their mortgage each month, but not everyone budgets for the running costs of their home. The mistake is to compare your current rental amount with the amount you would pay on a mortgage – forgetting to factor in the costs of home-ownership which can be as high as 50% of your mortgage repayments.

Ask any homeowner – it is getting tougher to make ends meet given the stratospheric rise of electricity prices along with property rates and taxes.

To avoid a nasty surprise, it is important to draw up a proper budget so that you understand the monthly running costs associated with home-ownership.

These include electricity and water, municipal rates and taxes, insurance and possibly sectional title levies. You also need to budget for maintenance. There are all sorts of maintenance issues with running a home – it’s not just about keeping the garden and swimming pool in good condition, but things wear down and break, like your geyser. If you don’t maintain your home it will devalue and you’ll struggle to sell it at a good price.

The table below will give you an idea of the household running costs, based on R1 million property:

Mortgage repayments R9000
Building insurance R250
Household insurance R250
Rates R500
Levies if applicable R500
Water R500
Electricity R800
Maintenance R900

What you will see from this, is that although your mortgage repayments are R9 000 per month, the other costs come to about R3 700. You need to be able to budget for this and afford it.

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