Three years to save a deposit, unless…

Saving for a depositEveryone knows by now that there are many advantages for homebuyers who pay a substantial deposit, but there are many who worry that by the time they can save enough, they will have missed the boat on low prices and low interest rates.

Could this be true? Just how long is it likely to take – assuming that they are serious about buying and, unlike most South Africans at this stage, also dedicated savers?

According to the latest BetterBond statistics, the average home price currently being paid by first-time buyers is R678 000, and the average deposit required of such buyers is some R68 000 – or just over 10%.

Meanwhile, the most recent Census figures show that the average earning of a two-income household in SA is now some R17 200 a month.

Thus those who are able to save 10% of their earnings a month (R1 720) would need more than three years (39,5 months) to save the 68 000 – by which time it is indeed likely that home prices will have moved up and that interest rates will have come off their current lows.

Wages and salaries are also likely to have gone up too, of course, but a large proportion of such increases are likely to be eaten up by rising food, power and transport costs as well as rent increases, leaving prospective buyers unable to raise their savings level by much.

The answer is for those who are keen to keen to get into the property market soon to lower their sights and buy a less expensive home to start with.

By doing this they will replace their monthly rent payment with a bond repayment on an asset that is increasing in value, and should also be able to divert what they were saving for a deposit into their home loan account, so that they quickly build up additional equity in their home. This can then be used to help them “trade-up” to a bigger and better home in a few years’ time.

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About BetterLife Home Loans

Since 2003 BetterLife Home Loans has been SA’s No.1 Bond Originator, handling the entire home loan application process on your behalf – free of charge! Our aim is still to source the best interest rate for you by submitting your home loan application to all the major banks. There is no easier way to apply for a Bond or Home Loan in South Africa!

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