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Q: I am starting a new job and will finally be able to buy property.

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However, I also need a car and can only afford one of these assets. I know in the long-term a property will be more beneficial but it is also hard to not have your own transport. How do I make the right decision, especially considering the interest rates will not be this low indefinitely?

A1: Many people choose to take on vehicle finance to afford the purchase but, as one of the most expensive forms of debt you can have, this can delay your ability to afford a home loan. It is better to invest in assets that have steady and stable growth over a medium to long term, even if these do not reflect a significant percentage growth month-on-month or year-on-year.

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To be honest, you don’t get much better than a home in that regard. I would not recommend spending your hard-earned savings on something that devalues immediately as you drive it off the lot. Instead, I would take the same amount of money and use some, or even all, of it towards a home deposit to get your foot in the door for homeownership. – Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa.

A2: With a prime lending rate at a current low of 7%, now is the ideal time to apply for a bond for your dream home. Buying a home is a long-term investment in an asset that can yield considerable capital growth over time.

Homeownership is also an important step towards financial freedom as it offers a form of forced savings that can be used in the future to buy a better home or for other purposes. Often the interest accrued on a car repayment is higher than for a bond repayment, although the term for a bond is usually much longer.

A R700 000 bond repayment at 7% requires a monthly instalment of R5 400 over 20 years. A car payment for the same value, and also at 7% interest, is R14 000 over five years. – Carl Coetzee, chief executive of BetterBond


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