Make your MOVE meaningful
When you are deciding on your next home move, make it meaningful by analysing whether you need to move towards becoming a property owner, or whether it would be better for you to move into a rented home.
When should you consider buying a home?
Buying a home may not be an option for everyone, but if you have reached a point in your life where you are ready for commitment, buying makes a lot of sense. Consider buying when:
- Financial security: you have a stable income and can afford a monthly bond repayment. Work out how much you can afford to spend on a home by using MSP’s bond calculator tool.
- Savings: you have paid off any short-term debt and have saved money to use as a deposit on a property. If you have between 10 to 20% of the purchase price in cash, you are in an excellent position to negotiate on the selling price of the property and you may qualify for a more favourable interest rate.
- Additional expenses: you are ready to take on the responsibilities of home ownership, such as home maintenance and the cost of rates and taxes. Sectional title homeowners need to budget for levies. Property owners also have to budget for credit insurance.
- Long-term view: you are ready to make a long-term commitment to your investment in property. Buying property to sell within a short timeframe is not advisable. In addition to the purchase price of the property, transfer and bond registration costs and the cost of your move increase your capital investment in the property. While property prices historically rise, it may take a few years for your property investment to increase in value.
- Financial future: you are planning for a secure financial future by building equity value in your property. The equity value is the difference between your property’s purchase price and its current market value.
When should you rather rent a home?
Sometimes, renting your residence is a wiser option than buying. Consider renting when:
- Timing: you are not sure that you want to stay in a certain area for longer than a year or two.
- Location: you are not fond of the area where you are renting.
- Finances: you do not earn enough to qualify for a bond.
- Stability: you do not earn a reliable income.
- Credit record: you have been blacklisted or have a poor credit record, and therefore cannot qualify for a home loan.
What are the advantages of buying?
The biggest advantage of home ownership over renting is the fact that you are paying off your own asset while living in it. Once you have paid off your bond, you will have a roof over your head without having to pay a monthly bond installment or rent. Your home is a valuable asset that you leave to your loved ones when you pass away.
If you are in a position to buy a home, but prefer to rent due to timing or location issues, consider making a property investment that you can rent out. Historically property values increase over time. You can use your rental income to pay your own rent. By investing in property, you will build up equity to use as a deposit on your future dream home.
Author: Multi Spectrum Property