Bite the bullet & buy the property: Thoughts on affordability

It almost seems surreal that the interest rate came down to a record low of 7% during the Covid-19 pandemic - one upside to an otherwise very tumultuous time - but it was inevitable that it would go up again. And it did. 

Today the interest rate is at a  hefty 11.75% but prospective buyers need not despair. "Property is a resilient, long-term investment that is worth sacrificing for," says Steven van Rooyen, Principal at Leapfrog Milnerton. 

He encourages buyers, particularly first-time buyers, to make an effort to understand affordability, as well as the various costs involved in purchasing and then and then to commit to an investment that your future self will thank you for.

"Work with a professional property advisor to get to grips with all that is involved and to guide you in finding the best property in terms of your needs and your budget," Van Rooyen advises. 

Understand affordability 

To be able to comfortably afford the monthly bond repayments is key. Calculate affordability by looking at your income and expenses against the cost of the property - in terms of monthly bond repayments, levies, homeowners fees and municipal charges - plus interest.

An affordability calculator, like this one by BetterBond, helps you work out exactly how much you can afford to put towards a bond each month. 

Affordability extends to other costs related to purchasing property, including:

Bond registration and transfer costs: This is the once-off cost paid to the conveyancing attorney to register the bond over the title deeds and is related to the loan amount. 

Rates, taxes,homeowners association fees and levies: Determined by the value of the property, as well as the size and the area in which the property is located. 

Homeowners insurance: Depending on the type of cover you opt for it may include emergency repair services or cover for temporary living arrangements in the event of the property needing to be evacuated. 

Every penny counts

Work with a bond originator, such as BetterBond, to help you secure a bond at the most favourable interest rate possible. "Even the smallest difference to the interest rate can make a huge difference in the long run," Van Rooyen explains. 

Bond originators apply to all the major banks on the client's (the buyer) behalf with the goal to negotiate the best rate, while also dealing with all the paperwork on your behalf. Plus the service is free to the buyer as the originator is paid by the bank (as a fee for bringing in clients). 

Having a deposit to put down also really helps with affordability as it brings down the monthly repayment amount. 

Make it happen 

It may be tough at the beginning, and it may mean sacrificing a few luxuries for a while, but bear in mind that property is an investment that is likely to significantly appreciate in value over time. What's more, the burden of the monthly bond payment is also reduced over time as it stays the same while your income is likely to go up. 

"Bite the bullet and go for it. Almost nobody says 'that property investment was a waste of money'", Van Rooyen concludes.