4 Top tips for first-time property buyers
Category Newsletter: Lead Article
The year 2020 may well go down as one many people would rather forget, thanks to the devastating effect the COVID-19 pandemic had on the world. But, as they say, every cloud has a silver lining and one of those linings is certainly the fact the interest rate came down to a 55-year low. After five consecutive cuts by the Reserve Bank, the interest rate is currently 7%, which has been wonderful for the property market in general, and for first-time buyers in particular.
"The current low cost of borrowing money from the banks means more people are able to purchase a property, making room for first-time buyers to get onto the property ladder," says Bruce Swain, CEO at Leapfrog Property Group. He goes on to highlight the importance of keeping money circulating in the economy in this way. "A buoyant property market, one where there is constant buying and selling going on, plays an important role in keeping the economy dynamic."
And while there has been an influx of first-time buyers to the market, the Leapfrog team have noticed some of the recurring questions these newbies have. "It's important that buyers are well-informed about the various aspects of their purchase. Property remains a major investment - in fact, one of the biggest most individuals are likely to make in their lifetimes - which is why it is crucial to do so in the cheapest and most cost-efficient way.
Here are four of the considerations first-time buyers should take into consideration.
Understand affordability
Yes, the interest rate is more than favourable at the moment but just because you can afford the monthly repayment, doesn't mean there aren't offer costs to take into account. "Affordability takes the full spectrum of costs into consideration, including expenses like the bond registration, transfer duties, initiation fees, occupational rent (where applicable) and even moving costs," Swain explains.
The property owner is also responsible for the municipal bill that includes rates and taxes, as well as repairs, maintenance and the like. And that's without mentioning homeowners insurance, as just one example.
"Affordability starts by drawing up a realistic budget to direct the planning that ensures you can comfortably afford the property, Swain believes.
Use a bond originator
While names like "BetterBond" and "Ooba" might ring a bell, it is incredibly useful to understand what these bond originators do and why it's a good idea to make use of one when purchasing a property.
A bond originator applies to various banks for a home loan on behalf of the applicant, working and negotiating to secure the most favourable interest rate and repayment term.
At no cost to the applicant, the bond originator handles all the paperwork and prides themselves on getting an application processed in a matter of days.
The job of the bond originator is to negotiate the best deal and remember that even a 0.25% difference on a home loan can mean huge savings over the course of the loan period.
Note the OTP
The OTP refers to the Offer to Purchase, a legally binding document that states the intention of purchase on the part of the buyer. The OTP outlines the terms of the sale and purchase of the property in question, with the explicit purpose of ensuring the deal for all parties on matters related to the property.
"Pay particular attention to the purchase price as stated in the document, the conditions of sale, any conditions around the property's existing fixture and fittings, as well as occupation date and occupational rent," Swain advises.
Any verbal arrangements or agreements should be noted in writing in the OTP to ensure it is legally binding.
Work with a trusted property advisor
Most people don't service their own car, cut their own hair or do their own taxes. Leaning on the professionals, particularly with an undertaking as significant as purchasing property, can mean the difference between an average and an exceptional property experience.
Property agents save you time and money, they deal with the paperwork on your behalf, and offer you peace of mind throughout the journey. "Their job is to understand the buyer's needs and meet them accordingly. The best thing a potential buyer can do is connected with a trusted property advisor," Swain says.
Author: Leapfrog Property Group
