Owning a house comes about through great financial discipline and sacrifice. Few can afford to pay for a house upfront or to even pay for the deposit. It usually takes years of saving and planning to be able to afford the deposit on a basic house.
The question is, how much do you need to save per month to be able to afford your down payment? Deposits are roughly 10% of a house’s total value or a minimum of R100 000. This deposit is used to cover transfer fees and various other costs of estate agents and lawyers.
For those who can’t save R100 000, an access bond can be granted by the banks, but you’ll end up paying more when you pay off your home loan. Having the full amount of the deposit in your account is the best way to start as you will then be able to bargain a lower interest rate on the loan with the bank.
Five years is the target saving time
On average, first-time property buyers can expect to save for around five years before accumulating R100 000. Like paying off a car, a few years of discipline and savings are required.
Reaching this target also depends on your monthly income. You could save more and reach the goal in a shorter time, but in general, five years is the time taken to save the deposit. That means you’d need to save R1670 per month for five years.
Alternatively, you could save R1390 per month for six years or R2090 per month for four years. The longer you plan to save, the less you need to put away each month. Here’s how much you need to save from one to ten years:
One year - R8340 per month
Two years - R4170 per month
Three years - R2780 per month
Four years - R2090 per month
Five years - R1670 per month
Six year - R1390 per month
Seven years - R1190 per month
Eight years - R1042 per month
Nine years - R926 per month
Ten years - R834 per month
As you can see, the difference in savings grows the shorter your saving period becomes (i.e. the difference between saving for two and three years is R1390 per month, whereas that difference between eight and nine years is just R116 per month).
Be smart with your finances
Saving enough for the deposit also depends on the financial institution you choose. You’re better off putting your money in a tax-free short-term investment than into an ordinary savings account with low returns and interest rates. Speaking to a financial advisor is the best way to get real advice that could maximise your savings.
The other way to ensure you meet your goals is to cut back on unnecessary expenses where possible. Avoid using credit accounts at clothing stores and electronics shops. Pay off your credit card debts and overdrafts as soon as possible. The monthly repayments on credit accounts could be going straight into your savings instead.
If your current salary is not quite enough, consider working a part-time job, doing some freelance work, tutoring or babysitting in your spare time. Any amount of extra income can be poured into your savings and speed the process up.
Once you’ve paid the deposit, make sure you can afford the monthly repayments on the home loan. A property will offer you a lifelong investment that will pay off when you retire.
___
With over half a century of expertise buying and selling properties, we understand it is more than just a transaction - this is your story - and we are honoured to write this chapter with you.
Allow us to provide you with our expert knowledge on the Tokai, Kirstenhof, Bergvliet, Meadowridge area, ensuring you have the most accurate information and support when buying or selling your property. Contact us on +27(0)21 794 5252. We are here to ensure that you prosper through property!
___
Make sure to follow us on Facebook, Twitter and LinkedIn for the latest tips and trends in the property industry, as well as some of the most relevant news about the area you call home. We are excited to be a part of your story.