Demystifying the myths: Debunking 8 common misconceptions about homebuying & property investment
I can’t afford to own my own home. I won’t qualify for a home loan. It requires tons of admin. It takes super long. These are some of the most common myths about homebuying that are preventing many South Africans from securing their financial future by becoming homeowners.
“While a home is probably the biggest and most important thing you’ll ever buy, it is also entirely doable!” says Carl Coetzee, CEO of BetterBond. “Working with a bond originator who can guide you every step of the way and advise you based on your unique circumstances, budget and lifestyle requirements, is the first step to making your dream of owning a home, come true.”
Seven greatest myths about homebuying & property investment:
- I can’t afford a home
There are online calculators that make it easy to work out what you can afford based on your income and monthly expenses. It’s important to understand the impact of changes in interest rates on your monthly bond repayments, and you can calculate these online too. Working out your home loan affordability before you buy makes all the difference.
The good news is that there are ways to make property more affordable. Government’s R1.1 million threshold on transfer duties makes it significantly easier for first-time homebuyers who buy for R1.1 million or less as they won’t have to budget for transfer duty. The same goes for buying off plan when you acquire a unit in a new development. Furthermore, many of the big banks also offer home loans of 100% or more to buyers who meet their criteria. This means that many of your home buying costs could be covered by your home loan.
- Use a bond originator
Working with a bond originator could help you secure a better interest rate on your home loan, which will reduce your monthly repayments and the interest you pay over time. “BetterBond prepares and submits your home loan application to multiple banks, including your own, and we can negotiate the best interest rate for you because the banks know they are competing for your business if the application comes through us,” explains Coetzee.
“This is called an ‘interest rate concession’ and when we apply to four banks on your behalf, our average saving is 0.61% which, at the current prime lending rate of 11.75% could you’re your interest rate is reduced to 11.14%. This would bring down your monthly bond repayments on a R2 million home by R839 from R21 764 to R20 835,” says Coetzee.
- I don’t earn enough to apply for a bond
Even aspirant homebuyers in the lower income brackets need not despair. Help is at hand. If you are a first-time buyer with a gross monthly income of between R3 501 and R22 000, you could qualify for the government’s Help Me
Access a Buy a Home subsidy or First Home Finance (formerly FLISP). For example, a family with a household income of R3 501 to R3 700 could qualify for a subsidy of R130 500 to put towards buying their first home – a potentially life-changing amount of money! “If you apply for a home loan through a bond originator like BetterBond, we will assess whether you qualify for this subsidy, and if you do, we can help you apply for it,” says Coetzee.
- It’s tricky for a women to buy on her own
More women than men or married couples have been buying property in South Africa in recent years! So, it’s high time this myth about women and property ownership is dispelled. “Recent research has shown that women own at least 60% of residential property in our country, and most of these women are single,” says Coetzee.
“There are a number of factors driving women to invest in property. Women are smashing glass ceilings in the workplace, resulting in greater financial independence. They are choosing to get married later, or not at all. They are choosing to delay motherhood, or opting not to have children. Property is widely recognised as a sound investment, and many women see real estate as a source of financial stability and security for themselves and their loved ones.”
- I am too young – or too old – to apply for a bond
It’s never too soon to apply for a bond. As soon as you are financially able, it’s a good time to consider investing in property. Data for July 2023 shows that the average income of buyers between the ages of 20 and 30 is R35 987.
The latest data shows that the average first-time buyer is 37 years old. “There are benefits to buyers waiting until they are financially stable, or have saved a deposit because this will reduce the interest and loan payment period on their home loan.
Even for much older buyers, there are plenty of property-ownership opportunities. While there may be a few more boxes for older buyers to tick when applying for a bond, and banks ideally want a buyer to be no older than 75 years when the loan is repaid, you can absolutely still consider buying a home in later life.
“There’s no right or wrong time to buy property. Affordability must be your main consideration, regardless of age. It’s important that you do what’s right for you at whatever point you are in life,” advises Coetzee.
- I can’t buy property if I am self-employed
With Global Data reporting that there were 5.3 million self-employed South Africans in 2021, there has seen a noticeable upswing in bond applications from self-employed buyers, says Coetzee. “It’s definitely possible to secure a bond as a self-employed person.
As with any bond application, make sure your tax and financial affairs are in order and up to date. Keep your personal and business income and expenses separate. It’s helpful to be able to put down a deposit as well. The banks want to see a proven history of managing your finances responsibly.”
- Joint ownership is complicated
Nowadays it is not uncommon for unmarried couples, family members or friends to buy property together. You don’t have to be married to apply for a bond with someone else, says Coetzee. It’s possible to apply for a bond with a partner or family member.
“The bond application process is very similar to applying for an individual loan and the credit histories of all applicants are taken into account.” The most important thing to remember, is probably the fact that if one of the partners defaults on a bond payment, the others will be liable and their credit scores will be affected.
- The admin is overwhelming
Don’t let the admin overwhelm you. There are ways to cut down on the paperwork!
Applying for home loan pre-approval is a great way of ultimately streamlining your home loan application. Not only will this save you time by speeding up your bond application as we’ll already have all your details on record, but it could also significantly improve your chance of securing a bond because you’ll already have proved that you can afford it.
If you’re keen on even less hassle, the brand-new DigiApp is worth considering. Short for ‘digital application’ it lets you give BetterBond consent to verify your identity and source the bulk of the required documents, without you having to gather any of the information. Safe, secure and super-quick, it’s the future of homebuying, at your fingertips.
“Our current home loan approval rate is 95% for clients who pre-approve first. This is significantly higher in comparison to clients going directly to their own bank instead of using a bond originator.”
Homebuying remains within reach for more people than we realise and it’s worth exploring your home loan affordability to understand what you could afford.
