Buying a home is something many South Africans aspire to. It is the biggest single transaction most of us will make in our lifetime, yet how much do we really understand about the process?
Bontle has been desperate to purchase her own house for the last two years. She wanted a home for her four-year-old daughter, a place with space to play and ideally a swimming pool. The problem was that Bontle found most properties out of her price range. “All I could afford was a tiny flat. I didn’t want to pay that amount of money and live on top of someone else, but even new developments were above my budget,” says Bontle.
But then Covid-19 hit. While the pandemic had a devastating impact on many people’s income, it also saw a dramatic fall in interest rates. The prime lending rate fell by nearly a third, from 10% to 7%. Suddenly Bontle’s affordability improved, and she was able to afford a higher mortgage. At the same time there was an increase in sellers and many people looked to downsize to cut costs.
“People recommended that I look at Kempton Park for a freestanding house. Mostly the properties were in gated communities, but these were out of my budget. But then one day I got a call from my estate agent,” explains Bontle. A stroke of luck, her estate agent’s neighbour was looking to sell. They had retired and needed to move into a smaller place as the running costs were hurting them. Their daughter had found a place for them in a retirement village, and they needed to sell urgently.
Bontle had found her dream home, a four bedroom, two bathroom freestanding house with a pool – and it was within her price range.
Bontle had already applied for a pre-approved mortgage and the bank had approved a mortgage of R1.6 million. “While I had qualified for that amount, I knew I could not manage the repayments and still spend money on fixing the home, so I made an offer of R1.45 million”. After paying a deposit of R72 500, Bontle’s total mortgage commitment was R1.377 million.
As the seller had been struggling financially, the property needed some attention – the pool was green and in need of repair. “I insisted on the pool being repaired as part of the offer to purchase,” says Bontle, who also requested a statement to fully understand the monthly rates, water and electricity costs.
Her bank approved the mortgage at an interest rate of 8.2%, but then Bontle heard that Capitec had recently launched a home loan offering. “I thought it would be worth finding out if they could better the offer, which they did at 7.7%.” To afford the monthly repayments Bontle has taken out a 30-year mortgage, however, once she has stabilised her finances after the costs of buying the property, she aims to pay in extra each month. Currently Bontle’s repayments are R10 337 a month. To settle the mortgage over 20 years, Bontle would need to increase her repayments by R1522 a month to R11 859.
While Bontle thought she had done all her homework, having saved for a deposit and bond registration, she was surprised to discover that there are more fees when it comes to buying a property – transfer costs paid to the conveyancing attorney to lodge the title deed, transfer duty on a property value above R1 million, as well bond registration costs.
“I knew about the bond registration costs from the mortgage quote, but I thought it covered all those fees. I wish the estate agent had told me about the real costs,” says Bontle, who had to put the unexpected fees onto her credit card. This will be paid off by any additional commission that she earns through her sales job.
As Bontle and her daughter move into their new home, she will also start to absorb the real costs of homeownership. It will take some sacrifice and commitment, but over time her finances will adjust, the financial stress will ease and wonderful memories will be created.
By Maya Fisher-French
*This is part one of a 6-part series in partnership with City Press, which takes a first-time home buyer through the process from beginning to end.
