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June 5th, 2014 by


home loan - Tips for first-time home buyers Buying a house for the first time can be exciting and daunting. Seeff Property chairman, Samuel Seeff, says it is still a favourable time for first time buyers to enter the market. But despite a favourable market the current repo rate, your budget, the costs of a home loan and insurance are just some of the factors you should be taking into consideration, says Nicolette Dirk. Research the property Steven Barker, head of home loans at Standard Bank, says buyers should find out more about the area in which the house is situated, the average value of properties in the suburb and take time to have the house examined for possible defects. This would include poor plumbing, potential electrical problems and structural concerns such as rising damp. “A complex with large outstanding debt and poor management may result in higher levies or special levies, which will cut into your monthly expenses and affect your property value for future sale opportunities,” says Barker. And even if the complex is financially sound and well run you still need to be an active member of the Trustee board, as important decisions are made at these meetings that will impact your pocket and property. Save up for that deposit Monde Motha, channel manager at FNB Home Loans, says prospective home owners that save for a deposit are not only more likely to obtain a loan, but can also benefit from a better interest rate. “This will save you a considerable amount over the term of your bond. For many owners your home will be your biggest asset, so the more it can work for you and help you create wealth, the better. This starts as early as when you are first considering buying a property and saving for a deposit,” says Motha. He adds that around half of all new home loan applicants are for 100% loans. This means that the applicant does not have the intention of putting a deposit down. “First time buyers are least likely to have a deposit available and they are increasing in prominence. However, putting down a deposit, even a minimal amount can greatly benefit a home buyer as people who demonstrate the ability to save are typically considered lower risk by the banks,” says Motha. If you are considered a low risk by your bank then you may even get a favourable rate, which could be equal to prime – if not less. There is no ‘right’ amount for a deposit. Banks typically ask for anything from 10% to 20%. However, if you are unable to afford such a high amount at the time, even 5% is better than no deposit at all reckon the experts. Plan a budget Laurence Hillman, MD of 1Life, says before you even start house hunting, add up all your current monthly expenses, minus your rent . You should then add the costs that will relate to the house such as bond repayments (don’t forget about credit life insurance), levies, municipal accounts including water, electricity, rates and taxes, as well as buildings insurance. “Once you have calculated these, you can establish whether or not your additional expenses will exceed your monthly income,” says Hillman. It could even be a good idea to draw up two budgets, one that will be your normal household budget for the month, and another which includes once-off additional costs that could arise, including the electricity deposit, transfer duties, attorney fees, or even the cost of hiring a moving company. Get proper insurance Once you own your own property, it is important that you insure the physical property against damage. You would need to consider what to cover and what it would cost if the entire property was destroyed. But Hillman warns that is not the only insurance you need. “Most banks these days insist on life insurance when you apply for a loan, as a means to protect their investment in you. This life cover also ensures that your family is not left with the burden of paying a home loan they can’t afford if anything should happen to you,” says Hillman. He adds that if you share your home with anyone who relies on your income to help pay the bond, you will need life insurance that specifies that specific person as a beneficiary, so he or she won’t lose the house if you pass away unexpectedly. You should also remember to find a provider that takes your life stage, affordability and individual policy requirements into consideration. This article was first published on MoneyBags: http://bit.ly/1kAWJ5p