Statistics show that it takes the average first-time home-owner five years to save R100 000 for a home loan deposit.
To do this, RE/MAX CEO Adrian Goblet says prospective home-owners would need to save at least R1 700 per month over a five-year period, R2 100 over four years and R2 800 over three years.
If you don’t have the patience to save for years and you’re able to part with R8 300 per month you’ll be able to save that R100k in just one year.
To ensure that you get the percentage of home loan you are looking for, you need to be financially prepared and this requires saving.
Tommy Nel, Standard Bank Head of Credit VAF Personal and Business Banking, says the best place to start, after drawing up a budget of course, is doing some homework around your repayments.
For instance, if you’re currently spending R5 000 on rent and you’re looking at purchasing property of R700 000 and you factor in levies, rates and taxes, that brings your cost of ownership to around R8 000.
“The best way you can prove to yourself that you’re ready to take on this commitment of paying a bond for potentially 240 months would then be to save or invest that R3 000 difference,” says Nel.
If you are unable to cope without the R3 000, then you’ll know that price bracket is out of your range and you will either need to look for a cheaper property or find an alternate source of income to subsidise the shortfall.
“It starts with a budget and understanding what your budget allows and to see what is that amount that you can put away and actually save towards your deposit. It will teach you a lot about your own ability to keep up with the bond repayments at the time when you are ready to purchase property,” Nel advises.
Goslett suggests pouring your savings into a tax-free savings account.
“It is better to put your monthly contribution into a tax-free, short-term investment that yields higher returns than a normal savings account at your bank,” he says.
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“Chat to you financial adviser to find out what the best options are. In all likelihood, they will be able to find an investment for you that will allow you to put away less than R1 700 a month, but still reach R100 000 by the end of five years.”
Another way you can save is by handling your financial affairs well and this means paying your bills on time and keeping a good credit score.
The banks are more likely to offer you a better interest rate on your home loan and your chances of qualifying for a full home loan without a deposit increase dramatically.
“Building up a good, solid financial track record of paying each and every bill on time that kind of thing really sets you up for getting a good credit score at the end of the day and there’s a lot of benefit that holds for consumers. So customers with good credit scores are much less likely to be asked to put down a deposit than people who might not have a long credit record. Looking after your credit score is the best way to improve your chances of qualifying for a 100% loan to value,” Nel says.