While buying your home may be one of the most exciting things you will ever do, there are many pitfalls that first-time and even second time home buyers could fall into along the way.
With this in mind we spoke with Simon Bray, CEO of Private Property, who are one of the headline sponsors at the Property Buyer Show Gauteng taking place in October, here are his key points to keep in mind when buying your first home.
Considering the price of homes in South Africa, one question I am often asked is if buying a home with a friend or partner is a good idea. If you’re battling to get onto the housing ladder or are keen to purchase an investment property, applying for a home loan with someone else can improve your chances.
A joint application increases your chances of qualifying as both parties’ incomes and expenses are considered when the bank assesses affordability, and by combining both salaries you will be able to purchase a more expensive property than you would otherwise be able to afford on your own. If both parties have a good credit record there is a high likelihood that the home loan application will be approved, and you could benefit from a better interest rate! And let’s not forget that by purchasing with someone else you will only pay half of the bond payments and legal fees.
However, there are some cons to bear in mind at the same time. Partners are jointly responsible for the total monthly bond payments, so if one partner defaults on his payments the others will have to cover the amount owing as well as the sum that they themselves have to pay in. Any default in payment to the bank will result in all partners’ credit records being affected. If one partner wants to sell their share, the partners taking over that share will be responsible for paying the transfer duty on it as well as any outstanding rates and taxes. Should one partner want to pull out of the bond agreement, the home loan facility will be closed, and a new bond application will have to be submitted and bond registration fees will be payable for the new home loan.
Another point often overlooked by first-time buyers when considering costs and affordability is insurance and what you will need for your home. In my experience these are the key policies all homeowners should have:
Homeowners Building Insurance is a policy which specifically covers the building structure of a home against accidental loss or damage caused by fire, theft or natural disasters like storm damage. Depending on the insurance company, the cover can also extend to include other structures like your garages, greenhouses and swimming pools, as well as permanent fixtures around your house like baths, toilets and fitted kitchens. Some policy suppliers also offer Personal Liability Cover in addition to the building insurance policy. This is to specifically protect property owners from any third party claims. The Personal Liability Cover offers financial protection for property owners should a third party lay a claim against a homeowner for accidental death, injury or illness which may occur on their property. It also offers homeowners financial protection for accidental loss or damage to a third party’s property.
Home Contents Insurance is designed to cover your household goods against loss or damage caused by accidents like theft, burglary, fire, malicious damage, and/or natural disasters like storm and flood damage amongst others.
Personal Valuables Insurance is an independent policy separate from homeowner’s insurance and home contents insurance. This policy covers any personal valuables that a homeowner would usually carry or wear outside of their home, like clothing, handbags, laptops, bicycles or even jewellery.