BUYERS who put down a deposit may qualify for an interest rate concession, which could save them thousands of rands on the total cost of their home loan. Freepik
Potential home buyers must ensure that their finances are in good shape before they look for a property or apply for a home loan, says Carl Coetzee, the chief executive of home-loan originator BetterBond. Although the banks are seeking to lend to home buyers, they still require borrowers to have clean credit records and sufficient disposable income to be able to afford the loan repayments, says Coetzee.

Buyers who can put down a deposit may qualify for an interest rate concession, which could save them thousands of rand on the total cost of their home loan, he says.

“For example, an interest rate reduction of just 0.5 percent on a 20-year bond of R1.5 million translates into a potential saving of more than R120 000 in interest, as well as a total of about R6 000 a year off the monthly bond instalments,” he says. First-time home-buyers should always seek pre-approval, he says.

“Most of the home loans have a variable interest rate. You might say: ‘Okay, I can afford a R10 000 repayment a month’, but in two years’ time the interest rate goes up, and all of a sudden you can't afford that. Be wary of your income and don't always go out to the maximum of what you can afford,” he says. Coetzee says if you are planning on applying for a home loan, you can improve your financial situation by doing the following:

* Dust off your budget. By this time of year, many consumers are no longer sticking to the budget they drew up in January. But if you're serious about reaching your financial goals, you need to know exactly where your money is going every month.

* Shoo away the budget “vampires”. Review all the subscriptions and services you pay for every month via debit order and that could be draining money from your budget without you even noticing.

* Brush up on your loyalty cards and rewards programmes. It’s a great feeling to earn points or rand for your purchases, but you need to gather them strategically. For example, if the monthly charge to belong to a rewards programme is more than you would earn from the programme, ditch it. With store cards, make sure you don't fall into the trap of spending simply to earn points, and stick to a few where the points don't expire quickly.

* Toss out bad spending habits. Most of us can't do much about the cost of things we have to pay for, such as food, petrol, electricity, school fees and the roof over our heads. But we can change our routines to avoid a substantial amount of what is called discretionary spending, like the cost of drinks with friends every Thursday night, or lunch out with the family every Sunday, or shopping for new clothes once a month.

* Steam-clean your credit record. Everyone is entitled to a free credit report from a credit bureau once a year. Even if you think your finances are in good shape, now’s a good time to check your report and make sure there are no nasty surprises, such as old accounts you forgot to close or someone else taking out credit in your name. To improve your credit score, you should also make sure that you make all your account payments on time every month.

* Scrub away your debts. It’s easy to think that you don’t owe that much when you have borrowed from several different credit providers, but once you add up everything outstanding on your car, credit card and store accounts, not to mention any personal or student loans, the total can come as quite a shock.

* Look for ways to earn extra cash. Clear out your cupboards or storage unit and hold a garage sale. Get creative and sell things you make online. Create a “side hustle” by using your knowledge, skills and spare time to do something people will pay for. Work part-time in the evenings or on weekends.

PERSONAL FINANCE