Buying a home is likely to be one of the biggest financial decisions you will make. While it is an emotional journey as much as an investment, the numbers do matter. Buyers need to consider affordability, understand their credit health, and apply for pre-approval so they have a clearer idea of what they can afford and how much they could borrow before they start looking for their dream home. From your chances of securing finance to the potential savings you could make on your home loan, these are five numbers worth knowing before you buy.
64.5%: your starting point for understanding bond approval
There is finance available for buyers who understand their credit health, can demonstrate their income and have sought pre-approval before applying for a home loan. It’s important to get your finances in order before you start house hunting, so you can approach the process with a clearer understanding of your borrowing options.
95%: the value of pre-approval
Pre-approval can help buyers understand their potential borrowing capacity and focus their property search on homes within their budget. It also puts them in a stronger position to move forward when they find the right property, although final bond approval remains subject to the lender’s assessment.
10%: a deposit worth aiming for
With banks placing greater emphasis on deposits, saving 10% of the purchase price is advisable for prospective buyers. On a R1.7 million home, that would amount to R170 000, excluding other upfront costs. A deposit of at least 10% can strengthen a buyer’s home loan application and may help them secure a more competitive interest rate.
The deposit required will depend on a buyer’s financial circumstances and the lender’s assessment, so prospective buyers should explore their options before deciding how much they need to save. Currently, deposit requirements for all buyers are up 21.7%. The higher interest rate environment has seen banks take a more conservative stance on deposits.
However, for first-time buyers, there has only been a 5.6% increase in deposit requirements. This makes it possible for new buyers to enter the market. Fortunately, incomes are still rising faster than the banks’ deposit requirements, so there is still opportunity to secure a home loan.
0.65 percentage points: the potential saving on your interest rate
On a R1.5 million home loan over 20 years, for example, a concession taking the interest rate from 10.75% to 10.1% would lower the monthly repayment from approximately R15 228 to R14 575. That is a saving of around R654 a month. While this may seem like a small amount, over the repayment period it can add up to about R156 000 in total repayment savings.
R1.7 million: the average home price
BetterBond’s data shows that buyers nationally are spending a record average of R1.7 million on their homes, even with rising fuel costs and inflationary pressures. There is still an appetite for lending, and prepared buyers are making the most of opportunities to invest in property, notwithstanding inflationary pressures and a higher interest rate environment.
Although house prices are rising faster than inflation, income levels are also improving. For buyers, the average purchase price is a useful market indicator, but it is not a measure of what every household can afford. Understanding your budget, allowing for the additional costs of buying, and making provision for possible interest rate increases are all important steps before committing to a home loan.
