It is usually wise to buy property as soon as you can afford it
A starter home is a property that will suit your needs for approximately the next five years, or until your circumstances change, whereas a for ever home is one you see yourself living in indefinitely – or for the next 20 to 30 years.
The question is, do you hold back until you can afford your for ever home, or do you take the plunge with a starter home? “The decision to buy a starter home now or wait will be determined issues such as affordability and your individual needs,” says Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa.
“While most people would opt to purchase their dream home straight away, most are not in a financial position to do so.” In today’s market, a professional income might not be enough to comfortably afford a home in some of the more expensive areas and it can take several years before a household is earning enough to purchase their dream home.
But, he says, once in the property market, it is easier to build from there, as property is an appreciating asset which will help homeowners afford an upgrade later.
“There is also the option of keeping your starter home as an investment property and letting it out as a form of passive income.”
Those who wait to buy their for ever home should rent a reasonably priced property so they can build up as much money as possible to put down a sizeable deposit.
“The larger the deposit you can put down the better, as this will reduce the monthly bond repayment. An advantage of waiting is avoiding the chance of being stuck with a property in a bad time to sell and being unable to move up. A disadvantage of waiting is that home prices will continue to increase, so something that is not affordable now might be potentially even less affordable in the future,” warns Goslett.
Buyers who want to fast-track the process of buying their for ever home should start where they can to get their foot in the door.
“It is a good idea to pay more on your bond instalments to reduce the bond term and the interest payable. Just an extra payment of R300 a month can reduce a 20-year bond of R500 000 by almost four years.
“Ultimately, the more you are able to lower your debt on your starter home, the more profit you’ll earn on the sale which you can then use towards purchasing your for ever home.”