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How to buy a House - Part 1

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How to buy a House - Part 1

by Kurt Carstens
01 Jun 2006

Way before deciding on whether to buy a flat or freestanding home, or to buy with or without a swimming pool, or even determining the location of where you lay your hat at night. You must determine if you can afford to purchase a home. Get out the pen and paper. Get out the calculator.



This is the first part of a series of articles on how to purchase your dream home.

Do your Homework

I am looking to buy a house, and just like you, its my first time. I know that there will be lots of paperwork and lots of stress, but hopefully we are going to get through all of this together.

Firstly I need to sit down and think why I want to buy a house:
  • I need a place to start my own family,
  • I am 30yrs old and earning a good income,
  • The property bubble is about to burst (again) and I have to make my move or lose out on this investment opportunity.
  • My investment portfolio is sorely lacking in the property sector.
  • Its either a flat or another new car for me.
  • And this is the most obvious for me. I get the speech from my dad, "Son, this house isn't big enough for both of us anymore, you either do as I say under my roof... or go find your own roof to live under."
............and so the house hunt begins

"I need to sit down and think why I want to buy a house"

Its very important to determine why you need to purchase property, but also equally important to determine, if you can afford to purchase property...

The Budget

Way before deciding on whether to buy a flat or freestanding home, or to buy with or without a swimming pool, or even determining the location of where you lay your hat at night. You must determine if you can afford to purchase a home.
Get out the pen and paper. Get out the calculator.

Now, lets budget (dont write in fiqures just yet), lets first determine what income we have in our household, whether joint or single incomes. And determine possible expenses in our newly acquired property.

Incomes
Income #1R
Income #2R
TOTAL INCOME:R
Less our Expenses
Bond PaymentR
Car paymentR
Life InsuranceR
Household InsuranceR
Car InsuranceR
Clothing AccountR
GroceriesR
Home TelephoneR
CellphoneR
Rates & TaxesR
ElectricityR
School FeesR
M-net / DSTV / InternetR
PetrolR
EntertainmentR
OtherR
TOTAL EXPENSES:R
Can you think of anymore expenses?
Subtract your Total expenses from your Total Incomes.
Income - Expenses = R

Hows your budget looking? Do you still have a few Rands left over at the end of every month?

You must determine if you can afford to purchase a home.

Debt

Consider this... If we dont attack our debts before we consider the purchase of property, we may be committing ourselves to a spiralling debt that may eventually cost us our home.

First pay the bulk of your outstanding debt, before trying to negotiate your bond repayment.
Priority must be made to:
  • Pay all clothing accounts
  • clear your cellphone debt / pay your contract.
  • Cancel unecessary subscribtions, ie: DSTV, Supersport Channel, Loslyf subscriptions (now is the time to save, save, save)
  • Focus on saving, even open a 32 day notice bank account, get motivated and start saving, challenge your partner as to who can save the most (remember your partner may be your co-signer / co-owner of your home), even if you start with just R100.00 per month, save R110.00 next month, then R 300.00 )
  • As you start reducing debt and closing the many credit accounts that so many of us have become accustomed to as a way of everyday life, start saving the payments you would normally spend on uneccessary debt. In no time, you would have saved thousands of rands, yes, thousands of rands!


You say you want proof?
I just quit smoking: so thats a pack a day I smoked for 10 years, so lets say I start saving R 15,50 a day for just two years, so that R15.50 x 365 days x 2 years = R 11 315.00

Ok so if I quit smoking, I can save R 11 315.00 over the next two years for my home deposit or I can furnish my house with, a fridge, 74cm TV, washing machine, microwave and a fish tank with a fish called Gordon.

I would confidently say that repaying my debts before I consider purchasing a house and / or if I quit smoking, would allow me to put a handsome sum of money into my home bond. Hmmmmmmm..... Something to consider.

If we dont attack our debts before we consider the purchase of property, we may be committing ourselves to a spiralling debt that may eventually cost us our home.

Even if it does take you 2years to be debt free, do it. A home is not simply a a bond repayment to the bank, a home will attract expenses and remember, property bubble or not, you want your property value to appreciate over time, and this means maintenance costs on the property, the monthly garden service, the bi-annual spring clean, the festive season painting of the exterior walls and the new year interior painting of the rooms. If we want our property to apreciate in value it is going to take a lot of care, love, and money.

Next, we will discuss........getting an expert opinion ie; estate agents, banks, bond orignators and attorneys.


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