Budget accurately before buying your home
Goslett says most South Africans are bad at budgeting. According to a survey by World Wide Worx, 57percent of South Africans run out of money by the 15th of the month.
He says homeowners can avoid this by working out their budget before buying their home.
“Considering that housing is the first thing on which South Africans spend their money, homeowners should make sure that they can afford to get through the rest of the month after having paid the monthly instalment on their home loan, as well as the various other costs involved in owning the property, before they go ahead with the purchase. This way they can be assured that they will have enough money left over to see them through the rest of the month without racking up debt,” he says.
Goslett says that, to achieve this, future homeowners need to draw up a realistic budget to project how much they spend on other expenses apart from what they are spending on rent.
“Once they have worked out this amount, they can set themselves a limit on what they can afford to pay in monthly instalments on a home loan.
“It is far better to avoid the temptation by limiting your search to properties that fall within your budget than to fall in love with a property and to then discover that you cannot afford the monthly repayments,” says Goslett.
He says homeowners should ask the seller how much they spend on monthly rates, so that they can build this amount into their budget.
“Try and avoid looking at homes that are at the very top end of your budget. While you might be able to afford the monthly repayment on the home loan, the additional monthly costs like rates, taxes and levies are likely to push you over the edge.
“It is better to purchase a home that you can afford and slowly work your way up to your dream home than to purchase your dream home right off the bat and end up ruining your credit score by racking up debt or losing your home to the bank because you cannot afford to keep up with the repayments,” says Goslett.
Samuel Seeff, the chairperson of the Seeff Property Group, says that with some creative thinking, homeowners can do more and build a financial buffer to protect their mortgage bond repayments and their biggest asset - their home.
Seeff has the following advice on how the typical middle-income household can supplement its budget and save:
* Buy below your means. Aim to buy for only 90percent of what you afford on monthly mortgage bond payments. Invest more cash as a deposit or buy lower. A R1.8 million home loan would cost about R18 500 a month compared with R16 500 for a R1.6m loan, thus resulting in a saving of about R2 000 a month on your bond repayments.
* Rent out a room. Consider turning an outside room into a rental unit or rent out a room. Short-stays are a popular option, and you can earn upwards of R500 a night or between R2500 and R4500 a month for a room or studio, depending on the area. Although subject to tax, you can still add a bit of extra cash into your household budget.
* Satellite TV and cellphones. Consider downgrading your satellite to streaming and save as much as R500 a month. Don’t take extras on your cellphone contract and stretch the time before renewing it to save a bit.
* Water, electricity and energy efficiency. Switch to smart energy by replacing appliances and lighting with energy-efficient products. Use energy-efficient heaters. Turn down your geysers and get a geyser blanket. Only boil as much water as you need and keep lights off. You can save R500 a monthly this way.
* Washing and water. Shower rather than bath. Use a dishwasher, which uses takes less water and you can wait until it is full before running a load. Use an automatic washing machine, which it uses less water and effort compared to a top loader.
* Meals, groceries and cleaning. Make daily lunches and cut the extra sides at dinner. Make Monday to Friday easy meal dishes and “splash out” on the weekend. Prep meals on weekends. Smart shopping and cooking can easily save between R1 000 and R2 000 a month.
* Waterwise gardening. Plant indigenous - it adds to conservation, reduces your carbon footprint and uses less water. Reduce lawn with hard landscaping, such as pavers and stones. Use container gardening for smaller gardens. Rainwater harvesting is vital for all watering and non-potable needs including swimming pool top ups.
* Drive less, walk more. If you are not using public transport, join a lift club. Social media groups make it easy to find lift clubs. If driving, plan your routes and shop on the way from work or only once a week. Drive less, walk more and get financially fit. You can save R500 a month (or more) with a lift club versus your car.