How do you buy property as a single person
We all know the age old saying “two heads are better than one” and the same applies when it comes to finances when you want to buy a home “two incomes are better than one”. But what if there is only one income, what if you are a single person wanting to buy your first home, how do you manage to save enough money to make that dream a reality?
The good news is, it is possible and here are a few easy steps to take to make it happen:
- Answer the 3 W’s
What? – what type of property would you like your first home to be? Are you looking for a small lock up and go apartment or are you looking to invest in a bigger home that you can share with renters?
Where? – In which city and area do you want to live? We all know that there are more expensive and less expensive suburbs to choose from. In less expensive suburbs you will find bigger properties for the same price that you can find in a smaller property in a more expensive area.
Why? – What is your motivation to buy a property? Do you want to live in the property yourself or are you buying it as an investment to rent out? If you will be renting the property out it will be easier to make repayments on your bond. You can still pay in an additional amount on your bond to ensure that your period of repayment is shorter.
- How much does the property cost that you want to buy?
When you have answered these questions, start looking around on property websites like https://www.propertycoza.com/ and determine what the average selling price for the type of property is in the area that you are looking at. This will help you to determine how much money you will need to save for an appropriate deposit.
Your two biggest upfront expenses will be the deposit and associated fees like the transfer fees, bond registration fees, lawyer fees etc. Having a sizeable deposit saved up for your home loan application shows the bank that you are financially responsible and lowers your risk profile. A good credit score is a key factor in not only receiving a bond but also influences your interest rate. A better interest rate will help to reduce your monthly repayments. If you are a first-time homebuyer, it is good to know that an average of 11% deposit is required.
We have some tools available for you on the Property.CoZa website to assist you with calculating if you can afford a property and how much your bond will be. Take a look at the following link to calculate your bond https://www.propertycoza.com/affordability-calculator/. Now you can also determine what the timeframe is that you need to be able to save enough money for a deposit.
- Consider a lower entry point and work your way up
By far the biggest mistake people make when it comes to saving for and buying their first home is that they want the dream and they want it now. They want to live in their dream suburb, which is often out of their price range.
It is hard to enter the market, but once you are in the market it is easier to work your way up to larger properties and better suburbs. Consider entering the market in a cheaper suburb and working your way towards the suburb of your choice.
Buying your first home is rarely a life decision so don’t stress about having to buy the perfect home the first time round. Purchasing in a cheaper area will allow you to save your deposit much quicker and then you can use the growth in equity as a launch pad to a newer property or one that you prefer.
- Be smart with your money and make room in your budget
When you do not have a family to look after and many other financial responsibilities, it is easier to cut on unnecessary costs.
- Stop buying lunch and that early morning cappuccino on your way to work.
- Cut down on the unhealthy habits of smoking and drinking.
- Make eating out a budgeted treat.
- Unsubscribe from luxury monthly subscriptions where you get fashion items or wine of the month.
- Always go shopping with a list and don’t buy anything else that you don’t need as a necessity.
- Shop at affordable retailers and steer clear from luxury items. For the next year ask yourself “is this a necessity or is this a luxury?”.
- Shop around for insurance quotes. Negotiate better deals with your insurance provider or find a better deal at a competitor. If your car has gotten older, your monthly premium should be less seeing that your car is worth less than when you started insuring it.
- Pay less on rent and move into a more affordable property.
- Take it straight out of your pay
The only way of ensuring that you put away a specific amount each month is to take it directly out of your paycheck at the beginning of the month. Do not spend throughout the month and only put away what is left over. You will never reach your target this way.
- Create a second income for yourself
The more money you can put away, the faster you will reach your goal. If you have any extra ways of generating a second source of income for example photography, house-sitting, providing administration or financial services like bookkeeping, use this money and save it in a low risk savings account.
If you receive any other money from other sources or “free money” like we call it, add this to your savings account. Examples of this is tax return money, competitions, cash gifts for your birthday etc.
- Talk to the professionals
Do your research and speak to professionals in the industry.
- Bond originators: contact a specialist who understands home loans and knows the do’s and don’ts when applying for a loan. Contact Property.CoZa Financial Services (PFS) at [email protected] or ask your Property.CoZa agent to put your in touch with a PFS Bond consultant.
- Property Professional / Agent: agents work with properties everyday of their lives. If you find an agent in the specific area that you would like to buy, they can advise you best on what is available in that area, what is the average selling prices and ultimately they will help you find the best property suited to your needs.
- Agents will also take care of all the complicated paperwork which will allow you to focus more on your savings plan.
- Agents also know what to look out for when buying property and they can assist with negotiating a better price between yourself and the seller.
Saving up is not a quick process, but when we start looking at our monthly budgets with a financial smart eye, we quickly see how much money we waste in a month. Yes, it will take a lot of sacrifice from you, but think about the end goal of owning something tangible that can appreciate in value instead of spending your money on short term satisfaction that won’t have any real value in five years’ time.