A comprehensive budget is the first step to owning your own home

Owning your own home is an achievement which many South Africans would like to accomplish, but how do you know if you can afford the house of your dreams?

You’ve looked at advertisements in various newspapers, or perhaps driven past billboards advertising new housing developments and according to your estimates, you should be able to buy your own property. But will you really be able to afford one?

Buying a house requires careful research into what you can really afford. Sometimes first time home-owners over extend themselves financially as they have not considered the other costs included when buying a house. These costs may include maintenance, municipal bills, levies, insurance and others.

Marius Marais, CEO of FNB Housing Finance suggests that you need to put together a detailed analysis of your monthly budget to help you determine if you are able to afford a house. “In short, a budget is adding up your monthly income and then deducting all the monthly expenses from this amount. The remaining amount indicates what you have left to pay towards your housing bond. Once you have an idea of what you can afford, you can then decide on the price range of the house you would like to buy and also consider the kind of areas you would like to live in within this range,” he says.

While putting together your budget you should also consider the different kind of expenses you have. Fixed expenses are those which normally remain the same every month and do not change. They may include:
•Rent (this can be added back to your disposable income since you will no longer be paying rent once you have bought your own property).
•Car instalment
•Educational costs (school fees, uniforms, etc.)
•Loan repayments

You will also need to consider variable expenses, which are costs that tend to change every month. Examples include entertainment, dining out, take-aways and clothing. Telephone bills, municipality bills and groceries can also be considered as variable costs because the amounts may change based on your usage every month.

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“The advantage with variable expenses is that they can be controlled. If you find that your fixed expenses are too high, and you would like to increase your chances of buying a house, you would need to discipline yourself to limit your spending on these. This will help you to boost the disposable income you have available towards buying your house.

If your disposable income is not adequate and you cannot afford a house, don’t be discouraged, it doesn’t mean your dream of becoming a home-owner is over. There are several things you can do to make your dream come true. For instance, you could consider paying off any loans or clothing accounts that you may have. You could also avoid taking unnecessary credit and choose to rather save towards your dream.

“Buying a house could be a drawn out process which makes it important to plan your finances accordingly especially when you are going to need bond finance. It is also a good idea to save while planning your purchase. Where applicable your savings, if used as an upfront deposit, will help reduce your interest charges and the repayment period – thus improving your affordability in the long term.

It can also be put towards the maintenance of your property, which will help you ensure that you keep your investment at its highest possible market value,” concludes Marius.

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