So you’re still going out most evenings of the week enjoying your young life, spending most of your money on entertainment and food while leaving the minimum needed slice of your salary to pay your landlord rent at the beginning of the month. And when you think of owning property – that thought gets buried somewhere in your future.
But the best time to step onto the property ladder is early in life. In fact, if you are 40 and not on the property market yet, here are 8 things you probably wish you have heard earlier.
It’s unlikely that you will have more money for a property as you grow older. A house will always be expensive – no matter what age you are. Those who tell you that you will have more money to buy your first property when you are in your 40s are probably speaking from no experience. In fact, when you are between 20 and 30, you have fewer financial burdens compared to older people.
Once you start a family, you’ll realise the vast financial commitments related to parenthood. The best is to get onto that property ladder while you’re still young, your earnings are increasing and your expenses are relatively in check.
Credit scoring is a system used by banks to check how financially attractive you are to them, using your past actions to predict how you will manage your money in the future. If you don’t have a good credit score you’ll struggle to get a mortgage. Some providers of mortgages refer to your credit rating as your ‘credit health’.
Improve your ‘credit health’ by paying your bills and using a credit card without missing payments. When banks measure your credit health, they look out for the four Cs – these are Character, Capital, Capacity and Collateral.
Saving in dribs and drabs on the days you actually feel like saving does very little to build a good deposit on your first home purchase. Force yourself to save a specific amount every month. It has been proven time and again that having a decent deposit to put down on a property significantly improves your chances of having your offer accepted – and your mortgage approved. There are many long-term benefits to having a deposit as well, like decreasing your monthly bond repayments and saving on interest over the term of the bond.
If you’re set on bricks and mortar, location is the key to affordability and most first-time buyers who are successful actually buy in “emerging areas” they did not know before they started their home search.
The difference in price depending on where you buy can be staggering and the mistake many young people make is that they get fixated on a specific area. This could be because they grew up in this area, have friends there or are under the impression this is the only place they can stay. Broaden your horizons and look beyond places you know – chances are you’ll unearth some hidden gems.
It’s not a disgrace to buy your first property with the assistance of a friend or your partner. There are many ways to manage shared ownership of property. Most couples avoid money talk, but ensuring a healthy financial future together means being clear on where you both are moneywise.
What is your joint income? What are your savings? What sort of a house deposit could you get together? Tough conversations now can help avoid tougher situations later. No matter if you buy with your partner or merely a friend or relative, it’s worth paying to get proper legal agreements drawn up in case one of you wants to sell your share. Your bank will be able to give you the best advice. Certain bank’s home loan call centre will call you to offer advice if you enter your details online.
When applying for a home loan, one of the most important considerations should be to secure the lowest possible interest rate. And when the home loan is granted, you should do everything you can to reduce the term and the interest that you pay. These will save you a great deal of money in the long term.
It’s a lot to take in and you may find the whole process of buying your first home quite stressful. Dealing with estate agents, banks and lawyers can be daunting – and costly, so check the fees and then check them again. Ask questions if you don’t understand what you are paying for and why you are paying it.
Yes – you will have to make sacrifices. You might even have to suffer a bit but unless your parents are rolling in cash, saving enough and making sacrifices to buy a property isn’t going to come easily. If you’re serious about getting on the property ladder you’ll probably have to live frugally for a while.
Remember – accepting short term pain for long term gain is tough but ultimately worth your while. It might just be the best financial decision you’ve ever made.
This feature about getting on the property ladder originally appeared here, courtesy of Nedbank.