The recent repo rate hike of 25 basis points has increased the prime lending rate to 10.75 percent. This has put many South Africans saving to buy a home under financial pressure.
WATCH : Mortgage bonds and how consumers can save money.
Fortunately, this is not an impossible goal, even though achieving this may be more difficult.
Target
The first thing to do is find out your savings goal amount.
A reputable bond originator can help you find out what you can afford. Bond originators offer a prequalification service, which is a preliminary assessment of your ability to qualify for a home loan. This enables you to search for a property within your price range while giving you the confidence of knowing that you are creditworthy.
You can also use an online affordability calculator to help determine the size of the home loan the bank will most likely grant.
The calculator will also enable you to work out bond and transfer costs, as well as monthly bond repayment amounts and how much you will need for a deposit. This will help you estimate how much you need to save before applying for a bond.
Once you know how much you need to save, you need to set a target date to keep you motivated and committed to saving.
It's important to be realistic in setting your deadline and deciding the steps to take to reach it. Think each step through and consider the challenges you might experience along the way.
Budget
Banks usually require a third of your household income to be disposable before they will consider approving a home loan. To free up disposable income, you need to budget carefully – and not be tempted to spend money that hasn't been budgeted for.
Draw up a detailed budget, taking into account fixed monthly expenses such as rent, transport, school fees and cellphone contracts, as well as variable expenses like food, groceries and clothing. Examine each expense carefully to see if there are any items you could do without to help speed up your savings. Be careful not to overspend, but allow a few treats each month to keep yourself motivated.
Pay off debt
In addition to sufficient disposable income, banks also look at your credit history to see if you are a good credit risk. To ensure a healthy credit score, you must pay your rent, credit card and any other debt repayments on time every month, without fail.
Above all, it's essential not to fall behind in your debt repayments, as this will negatively affect your credit score. As you pay off your debts, rechannel those funds into your home savings account.
Keep in mind that the sooner you pay off your debts, the sooner your goal of owning your own home will become a reality.
Writer: Sarah-Jane Meyer
