How to Conquer First-Time Buyer Fears After Signing the OTP
It is not uncommon for first-time buyers to experience anxiety after signing the OTP and realizing that they have now locked themselves into millions of Rands in debt. As one of the biggest purchases one can ever make, it is entirely normal to experience this form of buyer’s regret. To help ease their minds, there are a few considerations of which first-time buyers should remind themselves whenever they feel these waves of anxiety rush to the surface. Here’s how you can conquer your first-time buyer fears…
“The first mistake buyers make is to think of the purchase solely in terms of the amount of debt they have taken on. Real estate is an appreciating asset. Instead of viewing it as an insurmountable mountain of debt, consider each repayment towards the home loan as an investment towards future wealth,” suggests Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
The second approach first-time buyers can adopt is to plan and budget accordingly so that they know they can always afford to keep up with the repayments. “One of the biggest concerns for first-time buyers is that they will fall behind on the repayments. The best way to eliminate this concern is to go over the individual’s finances and to create a budget that he/she can stick to so that this never becomes a justifiable concern,” he recommends.
Why buy now?
“Money has not been this cheap to borrow in a very long time,” says Graham Ross, manager of Just Property Blouberg. “If you are going to buy, now is the time. You may find you are able to afford a bigger bond, which could put you in an area where a year ago you could not afford to buy.”
Suzette Moco, a Just Property agent in Gqeberha agrees, adding: “Lower interest rates and transfer duties have improved everyone’s chances of securing finance and property ownership. My advice to buyers would be to find out what bond amount they qualify for first. When you see your ideal home, you need to be ready to act. In many areas, there is limited stock, and the bargains get snapped up quickly.”
That being said, there are things that are out of buyers control that could affect their ability to make their monthly repayment. For example, interest rates can change every two months when the MPC meets. “The best way to avoid unnecessary stress around this is to purchase within one’s means and to leave room for a 0.25% increase. Historically, the MPC usually never hikes interest rates by more than 0.25% points at any given meeting. If there is a series of interest rate hikes, these usually only happen gradually which gives homeowners the time to plan and adjust their budget as necessary,” he explains.
Having a contingency fund could also prove helpful in putting buyers’ minds at ease about their purchase. “Life is unpredictable. Things often break or suddenly need replacing, which can put financial strain on a household. Buyers might also find themselves temporarily unemployed during the span of their home loan. Having roughly around two months’ salary set aside in a tax-free emergency savings fund can lessen the anxiety buyers may feel around keeping up with their repayments,” he advises.
Turning fear into fortune
After conducting all the necessary planning, Goslett suggests putting these jitters out of your mind and concentrating instead on the excitement of purchasing your first property. “Once assured that they have made the right decision, buyers should distract themselves from unnecessary worry by focusing on all the benefits of owning their own home. For example, homeowners can hang pictures without getting a landlord’s approval and the landlord no longer has the ability to sell the home while you’re still living in it, or to increase your rent beyond what you can afford.”
“If thinking of these benefits don’t work, then build up excitement for your new home by planning a COVID-friendly housewarming with friends and family and start shopping for new furniture for the new home. Purchasing your first home is a big milestone, so do not allow anxiety to sully what ought to be the start of a very exciting chapter in your life,” Goslett concludes.