For most young people buying a home is a financial priority, but a home is a significant purchase and it’s important to get your finances in order first.
Two of the Absa/City Press Money Makeover contestants are preparing for this big step.
Molefi has no short-term debt and plans on getting married in the next few years. His goal is to buy a home for his future wife and himself in 2026.
Molefi will also need to consider the costs of purchasing a home. These include transfer costs paid to the conveyancing attorney, transfer duty (tax) on a property valued at more than R1 million, and bond registration costs.
When Mlibokazi entered the Money Makeover Challenge, her dream was to buy a family home. While this is still a goal, she and her husband have identified that they need to first focus on getting their finances in order before committing to home ownership.
The first step is to pay off their short-term debt and improve their credit scores. Once that has been achieved, the money that was going to settle debt can be used to start saving for a deposit.
What will it cost to run the home?
When making the decision to switch from renting to buying, and when calculating what you can afford, make sure you add in all the other costs that come with home ownership – it is not just about the monthly mortgage payment.
There are more costs to home ownership than there are for someone renting. You will have to pay rates and taxes, utility connection fees, levies, and cover all maintenance costs. These could add up to 30% of your mortgage costs.
You need to add these running costs, as well as electricity and water, to your affordability assessment. Once you start to look for properties, ask the estate agent to provide a statement to illustrate all the monthly costs, so be sure to ask for the rates, utility, and levy bills.
Head over to the Money Makeover website to read more about the considerations that need to be taken into account when you are planning to own a home.