Banks and mortgage companies understand that purchasing a home is an important investment, whether you’re a first time buyer, or buying your second or third home.
A mortgage-able property allows the buyer to apply for a home loan by using the property he buys, as security for obtaining the home loan. In other words, if you don’t repay your home loan, the bank will take your property to recover its losses.
Mortgage is usually repayable over 20 years. Some banks allow you to pay it over a period of up to 30 years, depending on the amount of the loan and your financial situation, but this is a costly alternative in the long run.
When buying a property it’s important to be familiar with what is required from you and what precautions you can take, to ensure that you qualify for a home loan.
Buying property is an emotional journey. The property you buy will be your home, and people have an emotional connection to where home is.
However, because buying property is an emotional decision, people could make fundamental and silly mistakes. Buyers need to consider the viability of their pockets and no need to be in a rush when buying property. Usually buyers would tend to difficult in considering the options that the estate agent is limiting them to.
Buyers also need to consider the type of home they want to buy. For example an upmarket bachelor flat can be suitable for a young couple whilst the same flat can be an unsatisfactory decision for a family.
It is also important to consider the area of your new home. Is the home centrally located or at least a manageable distance to work and to the kid’s school, groceries stores and health care providers. Most important is the area relatively safe and secure. Although you may get “more home” for your money in a less desirable part of your city or town, these may not be suitable areas for children to live and play in. The value may also not appreciate as it will in more sought-after areas.
Once you have considered the above facts then you can start looking at financing option.
Sourcing the finance with which to purchase your home
There are very few people who are fortunate enough to buy a home for cash. Most people have to borrow money from a financial institution:
Banks : Home loan finance is a major part of a bank’s business.
Building Societies : Building societies used to be financial institutions registered in terms of the Building Societies Act 24 of 1965, and were then the main source of finance for home loans. All but two building societies were later converted into banks.
The Building Societies Act (later renamed the Mutual Building Societies Act) was finally repealed in 1993, and the two remaining building societies were then converted into mutual banks registered in terms of the Mutual Banks Act 124 of 1993.
Strictly speaking, therefore, there are no longer any ‘building societies’ in South Africa; only banks registered in terms of the Banks Act 1990, and mutual banks registered in terms of the Mutual Banks Act 1993. The expression ‘building society’ is however, still commonly used in practice and refers generally to a financial institution that can be approached for home loan finance.
Other Financial Institutions: These institutions are not banks, although they specialise in home loans. They fund loans through the process of securitisation, and often charge a once-off admin fee instead of monthly admin fees.
Useful tips for first time home buyers
Take a digital camera with you when house-hunting. Having photographs in front of you will help you recall specific details of each home you see – which is particularly useful if you’re viewing up to six homes in a single day.
Write down key points about each home you see as you’re inspecting it. In particular, record its size, special features, design and other factors which may influence your decision.
Take note of the area and its surrounds. Is the house close to all amenities, or is it in a remote location? Would you be happy to live in that particular neighbourhood?
When you’ve narrowed down your options, ask to view the homes you like best a second time. This will help you to narrow down your options further
Now that you’ve found your ideal home, all that remains is to close the deal – you’ll need a mortgage. In most cases the Seller’s estate agent will urge you to let them find a mortgage provider for you. Why – because they earn a handsome commission from the bank! But why not shop around then deal direct? Remember, this will be a long term relationship.
You can also make use of our mortgage calculators to discover how big a loan you could qualify for. Wishing you all the best in finding your new home.