Like a virgin

If you had R1-million to spare where would you invest? If you're South African you'll probably buy residential property.

A poll by propertygenie.co.za to gauge whether South Africans' perceptions towards property had changed after a series of rate hikes and negative real price growth revealed that we're still very much in love with property. "It’s still way up on top of investors' wish lists with 58 percent of respondents saying they would invest in residential property if they were given R1-million to spend," says Johan Strydom, general manager of propertygenie.co.za.

Owning the house or flat you live in is a dream South Africans of all colours and creeds share. For most their home is more than a place to live in — it's a financial asset, a place to raise a family, a retirement plan and a powerful signal that you have arrived.

Buying a home for the first time is an exhilarating experience, but requires know-how if you're going to make the right decisions. You're going to have to deal with estate agents, home loan providers, home inspectors and a host of other experts that will help you achieve your dream. You need to have a good idea what each of these professionals can and should do for you.

Here are six questions virgin home buyers frequently ask in their quest to live happily ever after:

1. Am I ready to buy?

   Owning a home can be a good investment, but your monthly repayment will be way more than what you used to pay for rent. There's no way buying a home is a good idea if you don't have a reliable income. Also, if you've been struggling to pay your bills it will have been noted and you'll have a hard time getting a home loan. Other factors that might count against you are large outstanding debts or numerous small accounts that add up.

   What it all boils down to is this: can you afford your repayments every month, even after accounting for a couple of interest rate hikes and all the additional costs that you can't foresee but will incur when you're a homeowner?

   Before you start hunting for a home it's vital to know what loan amount you qualify for and how much the property will cost you in terms of bond repayments and the total cost of the loan. Use this calculator (click here) to find out.

2. What should I consider before I start hunting?

   How much space do you need? Do you prefer a sectional title unit or a freestanding home? Your home should suit your lifestyle. Are you planning to start a family or increase the size of yours within the next two years or so? Do you like the vibe of downtown or prefer the more genteel surroundings some suburbs offer? Drive around all the neighbourhoods where you consider buying and jot down your likes and dislikes.

   Before you start looking at homes, ask yourself how you feel about things like being close to schools and your job. Do you drive a car or make use of public transport? How accessible are the main routes or bus stops and train stations that you need to use? How close are you to amenities that appeal to you? Do you want to be near important shopping nodes or malls? Are things like access to libraries and museums important? Are you a city slicker or a country girl?

   Make a list of 'must haves' and 'nice to haves' to guide you when you start looking for your house or flat.

   It's important to also consider the community that you might be moving to. South Africa is an extremely diverse society and you might not feel comfortable everywhere. Talk to the people that live in the neighbourhood you're interested in to get a feel for the place.

3. How do I hunt for a house?

   Get into the habit of browsing the property sections of various newspapers and websites every week and approach estate agents serving the areas that you're interested in.

   Search property databases (click here to search the largest property database in South Africa) and view every house that tickles your fancy. Remember to make notes and take pictures of the ones that stand out.

4. How can I finance my first home?

   Most people need a home loan to purchase real estate. The loan itself includes a legal claim by your lender on the property that secures your promise to pay the debt. You can apply for a home loan at any of the banks or through mortgage providers such as ooba and Integer. Alternatively, you can approach a bond originator who'll approach various banks on your behalf to negotiate the best deal.

   When taking out a home loan you have to decide whether you prefer a fixed or variable interest rate. By fixing your rate your repayments will remain the same for the period that you have fixed the rate for. The main advantages of having a fixed interest rate is the predictability it provides and the fact that you'll be unaffected by interest rate hikes.

   All this might sound great, but remember that the lender will only fix the rate at a much higher level than the variable one. Also, you'll lose out should rates start falling as they're predicted to do before long. It's generally best to choose a variable interest rate, except if you must have certainty with regards to your repayments.

   If you choose a variable rate your repayments will increase or decrease along with the prevailing interest rate set by the Monetary Policy Committee of the South African Reserve Bank.

   Mortgage providers offer lower variable rates than fixed ones and your monthly repayments should therefore be lower.

   In addition to deciding how interest will be charged you have to set the repayment period. The longer your repayment period the lower your monthly instalments will be. The total cost over the life of your loan will, however, increase. Most people choose to pay their homes off over 20 years but, depending on the loan amount, you could choose a repayment period of up to 30 years. By increasing your monthly instalment you'll shorten the repayment term.

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