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THREADS: Cape Town’s Property Tapestry

Buying a home is an adventure often coloured by dreams of appealing spaces, welcoming neighbourhoods, and a place to call your own. However, amid the excitement lies a crucial aspect often overlooked: managing your property finances effectively. As the heartbeat of your home-buying journey, sound financial management lays the foundation for success, ensuring that your dreams materialise into a sustainable reality, says Cape Town real estate expert Sandy Walsh. She unlocks the complexities of mortgage approvals, hidden costs and practical strategies to navigate property finances effectively on your homeownership journey.

Buying a property entails more than just signing an offer to purchase (OTP) once you’ve found your dream house. Before you consider buying, you must be well informed, says real estate expert Sandy Walsh, General Manager at Property.CoZa Prestige on Cape Town’s Atlantic Seaboard.
Walsh asserts that understanding additional ownership costs is essential for buyers to manage their property ownership finances well.
With more than 25 years’ experience in real estate, she shares her knowledge in this guide on mastering financial management when buying property.

1. Maximise Financial Clarity

• Budgeting precision: Access to effective finance management ensures buyers accurately budget for property-related expenses. These include mortgage payments, life assurance, homeowner insurance, rates and taxes, levies where necessary, and maintenance costs. With insufficient money oversight, buyers may overspend or underestimate their financial commitments, leading to financial strain or foreclosure.
• Loan approval: Appropriate financial management increases the chance of being approved for a loan. Lenders assess buyers’ financial health and creditworthiness to determine loan eligibility and interest rates. Walsh says buyers with well-managed finances and a favourable credit score are more likely to secure good loan terms. “Lower interest rates and higher loan amounts make property ownership more feasible and affordable.”
• Investment shield: Handling your finances carefully helps protect your investment as you can build property equity and safeguard against potential financial downturns or unexpected expenses. Walsh says taking a proactive approach alleviates risks and enhances the long-term value and stability of a buyer’s investment.
• Financial flexibility: Accessing prudent property finance management provides flexibility and peace of mind. “If you maintain healthy financial habits and reserves, you can navigate unforeseen circumstances, such as job loss or economic fluctuations, without jeopardising your ability to meet mortgage obligations or maintain property ownership,” explains Walsh.

2. Financial Compass

• Understand affordability: A reputable estate agent should advise buyers to carefully assess their financial situation and determine their affordability threshold before purchasing a property. This involves evaluating income, expenses, debt obligations, and potential future expenses to establish a realistic budget for property acquisition.
• Review financing options: Estate agents can help guide buyers in exploring various financing options to identify the most suitable mortgage product for their needs. This includes comparing interest rates, loan terms, down payment requirements, and eligibility criteria across different lenders to secure the most favourable financing terms.
• Heed additional costs: Estate agents should educate buyers about the additional costs associated with property purchases beyond the purchase price and mortgage payments. These may include closing costs, property taxes, homeowners’ association fees, insurance premiums, and maintenance expenses. Walsh says advising buyers to budget for these costs upfront can prevent financial surprises post-purchase.

3. Strategy Help

• Access financial advisors: Estate agents may suggest the services of a certified financial advisor to provide personalised financial guidance tailored to buyers’ needs and circumstances. “Financial advisers are well placed to advise buyers about advice on budgeting, debt management, savings strategies, and mortgage planning to optimise your financial health and readiness to purchase a property,” Walsh remarks.
• Educate and inform: Estate agents should offer educational resources and tools to empower buyers with financial knowledge and skills. This may include workshops, seminars, online resources, and information explaining budgeting, credit management, mortgage basics, and property investment strategies. “Equipping buyers with essential financial literacy enhances their decision-making capabilities and confidence throughout the buying process,” comments Walsh.
• Negotiate favourable terms: Walsh says that estate agents can negotiate on a buyer’s behalf to secure good terms and conditions in property transactions, especially regarding financing arrangements. This may involve negotiating purchase price adjustments, seller concessions, financing contingencies, and contractual terms to optimise buyers’ financial outcomes and minimise financial risks associated with the transaction.
• The starting point to understanding your home buying power and doing good financial planning is a simple online pre-qualification process.

Photo credit: Kindel Media

4. Homeownership

Walsh says a common misperception is that switching from renting a property to owning a property is simply about the rental changing to a mortgage bond.

She points out that the added costs of homeownership may stretch a new owner in the first few years, and lifestyle adjustments may need to be made to fit the bill.

“These adjustments will pay off over time if you are prudent about making provision for maintaining and taking care of your home,” Walsh remarks that since homeownership is generally the most significant investment an individual will make, it’s crucial to base your ongoing financial outlook on achieving the highest appreciation of your asset if you decide to sell it in future.

Lastly, Walsh says mastering financial property management is not just about looking at numbers; homeownership encompasses securing your future, building wealth, and creating a home. “By managing your property finances efficiently, you invest in bricks and mortar, realise your aspirations, and fulfil your dreams. So, get informed and get advice from trusted financial advisors so you can confidently embark on this journey.”