Buying or renting a home
Renting your first property
Moving into your own place is an exciting time in your life. Looking for places to live and shopping for things for your new home but there are a few things to consider before making the move. When renting a property, it usually comes with a fixed-term rental contract. An important payment every month with consequence if these monthly payments aren't met.
There are several factors to look at - Affordability, your credit score and up-front costs. These are things that can stop you from moving into your new home. The first thing to look as is your affordability. The safe rule is to find a place where the rental is one third of your monthly salary or less. This rule is often used by most estate agents and they will ask you to provide three months bank statements when processing your rental. Secondly is your credit score - make sure you have paid your monthly creditors on time and the correct amount. When a credit check is performed, they will be able to see if you are good or bad at paying your bills and a "slow payer" may be declined for a lease. Thirdly, deposits and up-front cost - some land lords can request two months' rent upfront which will need to be paid before you can move in. Additional costs can be an electricity and water deposit. Some estates my charge you a processing free for your rental and access to the estate. These kinds of things can often be forgotten and may have you dipping into your savings. If your affordability and credit score pass, you will sign your lease.
A lease is a legal document that sets out the terms and conditions of your rental as well as the obligations and conditions of both parties' responsibilities. This will often state what your yearly rental increase will be, if you are/aren't allowed pets as well as a basic agreement to look after your new home.
In a case with an agent, request to be present when doing the defects inspection. You can then question and note anything you are not happy with or anything of concern. This defects inspection will be done before and at the end of your lease to determine if you have made any damages to the property that need repairs. If so, any costs will be taken from your deposit.
Once that is all done, you can move in on the agreed upon date and make yourself at home. Just remember to be a good tenant, look after the property and you will be in your home for many years.
Buying your first house
When buying a home, you go through a similar process as renting only it's a 20-year bond and a much bigger deposit. First off is affordability, how much can you afford to pay every month for bond repayments? We would all love a big fancy house, but can you afford it? Again, a good judge is taking your monthly income and dividing it by 3. Many banks also have bond affordability and bond repayment calculators online so that you can get a better idea. You will also need to have a clear credit score when applying for the bond. Your bank will have some additional cost so make note of those.
The next thing to look at is the amount of cash that you have available. In some cases, you might be asked to place a deposit down. The safe rule of thumb is 10% of the purchase price / bond amount. The more deposit you have, the smaller the bond and the less to pay back each month. Also, if the house costs more than R900 000, you will have to pay transfer costs. Other costs are bond registration fees and attorneys' fees.
You will also need to have some money saved for additional costs. Do you want to install an alarm? Does the garden need a once off clean or does the house need a new coat of paint? Things such as upgrades or touch ups will need to be budgeted for as well as for the deposits for basic service connections like your lights, water and rates at your local council.
It is highly recommended to think smart and be honest with yourself before buying or renting a property. You should look at other aspects before making up your mind, such as distance to work, nearby schools, traffic, shops and other variables that would affect you if you were to take occupation.
Ensure that you are always honest about finances and budgets and rather go below your means instead of above. Buying or renting a property is a huge decision and can have serious financial implications if you miss those monthly payments, so be sure to think smart.