Advice to potential home buyers: acquire the savings habit early on in life.
Category Advice
If there is one characteristic that differentiates the young South African middle class from that of their predecessors, it is their unwillingness to acquire the savings habit from an early age, says Rowan Alexander, Director of Alexander Swart Property. "Our parents' generation wasinculcated with the belief that a man who could not save was unreliable and not to be trusted but today's young middle class have a very different approach. They tend to live for the day and, far from saving, sometimes maximize their borrowings to the hilt."
"This short-sighted view tends to alter radically once the young person, or couple begins to appreciate that it will be beneficial to acquire a growing asset by owning their own home, rather than remaining tenants all their lives. The huge value of saving then becomes clear to themand belatedly they start making provision for a deposit on a home.
"As estate agents and, in a sense financial advisors to our clients,we repeatedly have to point out to them just how sensible it is to prepare thoroughly for home ownership by saving. The new home buyer, who can produce 10% of the sale price at the outset, will be looked onfavourably by the banks and probably qualify for a 90% bond. He will also be in a strong position to get a lower interest rate than the man who cannot produce a deposit."
Taking as an example, a 30 year bond on a R1, 5 million home, Alexander said the applicant with a R150 000 deposit would probably qualify for a one percent reduction in interest rate. This would amount to a saving of approximately R365 000 over the 30 year loan period. At the same time, he will not be paying interest on the R150 000 deposit. Over the full loan period, this could amount to a further of R 335 000, giving a total saving in the region of R700 000.
"Our advice about saving will often seem boring and far too cautious for many young people. In my experience I have never known a young couple, who did not benefit substantially from going on a savings drive - even if it only enabled them to temporarily abandon the rat race and adopt a freer lifestyle,"said Alexander.
For further information, contact Rowan Alexander on 082 581 3116 or email: rowan@asproperty.co.za
Author: Independent Author
