PREPPING TO BUY A HOME IN 2023
Category Blog
If 2023 is the year you are determined to buy your first home or even a new home, the best first step is to save for a deposit.
"A deposit is a lump sum of money that is paid towards the overall cost of the home or land you are buying. Being able to put down a deposit is a big advantage as it lowers the amount of the loan required and ultimately also means you will pay less interest over the loan period.
"In essence, putting down a 10% deposit on a R1-million home could save you almost R1,000 per month, which means you will be paying around R240,000 less in interest on the loan over 20 years," says Khan. "Also bear in mind that in paying a deposit, the home loan amount applied for is lowered, thereby reducing the required monthly instalment and positively influencing affordability factors for the applicant."
In difficult times, where the consumer is stressed by rising inflation, higher costs for fuel, food, transport and rate hikes, a pertinent question is revealed: how do you save for a deposit? Khan has a single-word answer: "balance"." Balance is key to much of life, whether it's sticking to a food or exercise regime or managing personal finances. If you want to save for a deposit, it will likely take discipline and being smart about the plan you put in place."
The bottom line, says Khan, is to create a habit of saving. "A savings mentality means becoming a smart consumer, and Absa encourages its customers to engage with the multitude of financial products to help induce this change of mindset. We obviously realise that no single person can control market movements, but we do promote the idea of being in control of how you react to those changes and how you can take control of your financial circumstances."
To kickstart your thinking to ensure you can plan for the purchase of a home in 2023 and have sufficient budget capacity to make home loan repayments affordable, Khan offers the following advice:
- Prepare a realistic budget: first, factor in essential purchases like bread and milk, leaving luxuries for last.
- List fixed costs and expenses (bond repayments, education fees etc.), followed by variable or changing costs (water and electricity, telephone bills etc.)
- When all expenses are added together, and if this results in costing more than your monthly income, you'll need to reevaluate your costs and cut down.
- Ideally, you should limit your expenses to allow for a fixed amount directed towards a monthly savings programme.
- Investigate the best banking option for your individual needs; often, you can save substantial amounts on bank charges by opting for a transactional value bundle.
- Savings accounts allow you to grow money that is invested. Absa has a range of savings accounts to suit every budget. Ask about our Tax-Free Deposit Account or TargetSave.
- Do your research: most savings accounts usually pay tiered interest, which means more money in your account will enable more interest return. You will find that every cent counts.
- Savings accounts are designed to encourage savings, so if you have more than two transactions a month through your bank account, it is then best to do those through a transactional account. This will allow your savings to escalate.
- Be disciplined. Budgeting and planning for your future require commitment. Ask your Absa consultant about a contractual savings account, which allows you to save a fixed amount every month for a chosen period of time. With Absa's TargetSave, individuals can save from as little as R100 per month for a minimum period of six months.
- Be responsible with credit. Buying on credit may be convenient; however, the knowledge, priority and consolidation of your debts, as well as aligning your lifestyle to what you can actually afford, is vital.
- Get professional advice. Navigating through all the varied savings and investment options on offer can be confusing. Visit your nearest Absa branch and get some advice from an expert.
From the above expert advice, it is clear to notice that budgeting is an important financial tool which can help you to plan for personal financial commitments and investments.
Author: Kerry Dimmer