Rent with your Eyes on the Goal

Category Advice

Rent with your Eyes on the Goal

Most South Africans dream of the day they can unlock the door to their very own home. The reality is, however, that it is just too expensive for many people to buy property.

MSP has come up with a good solution for citizens with the goal of home ownership. Rent a home in Kirkney Estate, West of Pretoria, until you can afford to buy it!

Affordability is key

While things are looking up for home buyers with the recent cut in the interest rate (the Reserve Bank had cut interest rates with 0,25% to 6,5% at the end of March 2018, bringing some relief to mortgage bond payers), affordability of mortgage bond repayments are still an issue for many buyers.

The cut in the interest rate will help many homebuyers over the long run, saving them thousands of rands on the total bond repayment over the 20-year term. The cut in March 2018 was the first interest rate cut since July 2017 and market specialists indicate that it should remain level for the rest of the year. However, market conditions are not cast in stone and while the interest rate seems to follow a level to downward trend, consumers who extend themselves by taking a bigger bond than they can really afford, can get into trouble should the interest rate rise again.   

When you apply for a home loan, the bank or financial institution would first look at affordability. If you earn a stable income, the bank may consider granting a home loan of which the monthly instalments would be no more than 30% of your disposable monthly income. However, if you have a lot of debt and other expenses, your disposable income is less because you literally have to spend a large portion of your income paying debt. This could mean you have too little left to afford paying a home loan.

The cost of homeownership

Apart from paying a monthly bond instalment, prospective homeowners need a cash deposit or access to money to pay the transfer costs. If you’re buying an entry-level home in Kirkney Estate for R619 900, the cost to transfer the property to your name will work out to around R20 000. You will have to be able to put down the R20 000 if you decide to buy.

Other costs of homeownership, which you are liable for when the property has been transferred to you, include homeowner insurance and rates and taxes, which are payable to the municipality. Levies are due in the case of sectional title homes (usually apartments and duplexes in complexes or security developments).  The homeowner has to budget monthly for these costs and for maintenance and repair costs, which could be incurred at older properties.

Let your rands make sense

Take Bughle and his wife as an example. They have a total monthly gross income (before any deductions) of R25 000. Once their fixed living expenses such as transport, school fees, medical aid, insurance, cell phones, groceries, clothing and water and electricity have been deduced, they are left with R10 000 per month. However, they also have store and credit card debt. Their debt payment amounts to R2 500 per month. This means they only have R7 500 left at the end of each month to spend on their accommodation - either to pay rent or a home loan repayment.  

A home loan of R619 900, which would afford them a two-bedroomed home in Kirkney Estate, would cost them a monthly repayment of R5 800 at an interest rate of 9,5% over 20 years.  However, the two-bedroomed 50m² home they are able to buy at this entry level price will simply be too small for their growing family.

They would like to buy a 75m² home in Kirkney Estate, which at a cost of R799 900 means their bond repayment at 9,5% interest over 20 years is R7 500 per month. They can simply not afford this bond repayment now, because it would leave them with no money to pay the other costs associated with home ownership, such as rates and taxes and homeowners’ insurance.

Bughle and his wife decided to work towards their dream of home ownership by renting a three-bedroomed home in Kirkney Estate for R6 500 per month. They are now putting in an extra effort to pay off more than the minimum required on their short-term debt (store cards and credit cards).

Once they have finished paying their debt, they plan to save up money for transfer costs and then purchase the home that they are renting. The rental arrangement with MSP works for them because they feel like they are almost the owners of the home they are renting and that one day, they will own their home. Renting while living in their dream home has become the biggest incentive for them to pay off their debt and start saving money.

Kirkney Estate, Pretoria

Kirkney Estate is in a convenient location in Pretoria West - only 10km from the Pretoria CBD, Soshanguve, Centurion and Hartebeespoort.

If you are dreaming of buying a home in Kirkney Estate, but cannot yet afford it, MSP gives you the opportunity to rent your brand new dream home until you are in a financial situation where you can afford to buy property.

The freestanding homes inside the walled development of Kirkney Estate each has an individually walled garden, carport and lawn. These homes have roof tiles, gutters and aluminium window frames with burglar proofing, as well as solar geysers. A two-bedroom, one bathroom home is available for rent at R5 500 per month and a three bedroom, one bathroom home at R6 500 per month. The development will also soon expand to introduce apartments.

Find out more about homes to rent in Kirkney Estate by contacting MSP Customer Care at 087 802 9006.

Author: Multi Spectrum Property

Submitted 10 Jul 18 / Views 630