Homeownership

Building or buying a house is one of the most important aspects in life and the largest investment in most people’s lives. However, most of the people enter the transaction without clear understanding and knowledge that there are other costs involved far beyond cost of the property itself. It is therefore highly important to be aware and cautious about all costs before making such a decision and create a realistic budget.

Shelter is a need for all, investing in property calls for a careful and proper planning to avoid unnecessary problems. Noting that mortgage instalment will comprise the highest expense is highly important. Not aligning and adjusting all other variable monthly expenses to comfortably provide for the instalment can result in negative consequences.

Planning and budgeting before building and buying a property is the key in this important investment. One needs to consider the three areas during this stage: initial purchase price or total building costs, all other costs to complete the transaction including, {architecture’s fees (where necessary), valuator’s fees, quantity surveyor’s fees (where necessary) engineer’s fees (where necessary), bond registration costs, mandatory insurances}, and the expected monthly instalment and when it is first due to be paid. In addition to the monthly home loan instalment, regular costs on a monthly/yearly basis including ground rent, home insurance and maintenance are to be paid.

The home loan sometimes requires a contribution, which can vary from 10 – 20% of the total cost of a house as a down payment. Also, to be paid are fees of about 2 – 6% covering other costs including loan origination fees and project management fees. Institutions differently treat owner’s contribution (deposit) towards a home loan, one must however understand advantages and disadvantages in this regard. While raising a deposit may not be easy, an instalment normally becomes less when it is paid, sometimes even the repayment period can be reduced. How about considering to save money on a monthly basis towards home loan deposit, or towards paying some of the expenses to be able to pay an affordable instalment that will not squeeze the monthly budget?

Homeownership is an important accomplishment for most people, but it’s also a major undertaking. Realizing this dream requires careful thought and practical budgeting to make sure it’s aligned with your long-term personal financial goals and vision for the future. It is an achievement to be cherished and enjoyed but such becomes a challenge when instalment is too high to impact other necessities. Plan accordingly, build/buy an acceptable house within own means.  “It is not about how big/expensive a house is but how happy the home is, without worrying much about what will happen should you default on your instalment because it is burdensome.”

“OWNING A HOME IS A KEYSTONE OF WEALTH, BOTH FINANCIAL AFFLUENCE AND EMOTIONAL SECURITY.”  Suze Orman