Four great ways to lower your housing costs
Housing costs account for at least 25% of most homeowners’ monthly expenditure, so it is definitely worth looking for ways to cut down on them and generate savings – without necessarily having to move. According to the experts, the best time to start this budget exercise is before you even move in by not choosing to buy a home that is more than you actually need. With the strict National Credit Act to consider, it is unlikely that your lender will allow you to buy more home than you can afford, but even that may be more than you really need.
Consider the size of the house you need, not the one you want
What you need to do first is think very carefully about how many bedrooms, bathrooms, and living rooms you and your family will require and use over the next five to seven years. Once that’s decided, you can then set out to find a compact (but not cramped) home that meets your specifications as closely as possible. Having unused rooms is like throwing money away, month after month, in unnecessarily high bond repayments, and having more space than needed will also result in pointless cleaning and energy sacrifice, not to mention lots of unnecessary costs, particularly with regards to maintenance.
Similarly, you should think about the size of the stand or garden you need before you buy. It may be great to have lots of space for children to play or a big poolside patio for entertaining, but a large property usually also means higher bond repayments and more upkeep, as well as higher security costs and higher municipal rate payments.
Save for a down payment
The second way to significantly lower your monthly housing cost is to save up until you can put down a deposit of 10% or even 20%. The larger the deposit, the smaller the home loan you will need, and the lower your monthly bond repayment will be.
In addition, paying a deposit will enable you to save a large amount of interest over the life of your home loan – as indicated in the accompanying table* below – even as you enjoy the benefit of the lower monthly repayments.
|Interest rate %||R800 000 (No deposit) Monthly instalment||Total interest over 20yrs R’s||R640 000
saving with deposit R’s
|9||7198||927 474||5758||741 979||185 495|
|10||7720||1 052 842||6176||842 273||210 569|
|11||8258||1 181 802||6606||945 441||236 361|
|12||8809||1 314 085||7047||1 051 268||262 817|
|13||9373||1 449 425||7498||1 159 540||289 885|
|14||9948||1 587 560||7959||1 270 048||317 512|
|15||10 534||1 728 236||8427||1 382 589||345 647|
|16||11 130||1 871 211||8904||1 496 969||374 242|
|17||11 734||2 016 257||9388||1 613 006||403 251|
|18||12 346||2 163 158||9877||1 730 527||432 631|
|19||12 965||2 311 715||10 372||1 849 341||462 374|
|20||13 591||2 461 743||10 872||1 969 395||492 348|
Monitor your utility costs and cut down where you can
The third thing you can do to cut your housing bill is to keep a close eye on your utility costs. As electricity and water charges continue to rise, even normal household activities like heating bathwater, cooking, keeping your home warm enough or cool enough, watering the garden and doing your washing can result in a hefty monthly bill from the municipality, so it is really worth trying to lower your consumption wherever possible.
Fortunately, there are many quick and easy ways to do so that don’t require a major capital outlay. Timer switches and geyser blankets are relatively inexpensive tools to help cut the cost of heating water, for example, while some basic insulation and weatherproofing can go a long way towards reducing the need for heating in winter and cooling in summer. Many homeowners also save money by increasing use of a microwave instead of a stove, or by installing ceiling fans instead of air-conditioners. Some even opt to make use of harvested rainwater for the garden and laundry. What is more, as these savings add up, you can choose to pay an additional amount off your mortgage every month, shorten the overall loan period and in so doing, generate even bigger interest savings through the power of amortisation.
Stay on top of home maintenance
The fourth and final way to lower housing costs is to get organised when it comes to home maintenance and upkeep by drawing up a workable schedule or annual plan. Everyone knows the saying that a “stich in time saves nine” and it is certainly true of home maintenance, especially when a small task done in time can save you from having to pay for a large and costly repair job down the line. The added bonus here is that by staying on top of things and keeping your home in good condition, you help protect its resale value – something that will benefit you hugely if and when you decide to sell one day in the future.
A little can go a long way and by doing what you can to cut down on your housing costs, you can actually end up saving a significant amount of money that can be better used elsewhere.
*Table is for indicative purposes only