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Is now a good time to buy a house?

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Readers ask a range of questions related to buying houses, paying mortgages, debt management and tracking shares

Rebecca writes:

I am a 36-year-old professional and single mother of two. I had planned that this would be the year I’d buy my own modest home. I have been listening to financial experts on TV saying that first-time home buyers must delay buying due to the economy.

However, I feel that waiting is not an option for me. Besides, I have not seen property prices declining in a long time, if ever. If I wait, I risk never being able to own my modest dream home in a good location. I do not want to compromise on the location of the property, as it is very important to me.

I earn R25 000 a month and save R3 000 every month into an RSA Retail Savings Bonds account and have saved R110 000. I have a good credit rating. Would it be wise for a person in my income bracket to buy property now?

Tommy Nel, head of credit at FNB Home Loans, replies:

The decision to buy a property should start with whether you can afford the asking price and what the impact of rising interest rates would be.

I would always advise potential homeowners that, when considering an investment into property, one should always do so on a long-term basis.

Trying to time the property-price growth cycle is not really that relevant if one has a really long-term investment horizon, especially if you consider the emotional benefits of having a home that you can call your own.

While a drop in house prices can never by ruled out completely, and some challenges are definitely lying ahead for South African consumers, as long as you can still make your monthly budget work if interest rates increase by 1% to 2%, I would unreservedly recommend that you commit to entering the property market.

It is still considered fairly unlikely that property prices will drop in nominal terms in the next year or so, and, even if they do, on a 20-year-plus basis it is really not that relevant.

It may well be that a better buying opportunity could present itself in six to 12 months as further interest rate increases stress some homeowners, but again it is not always possible to predict these things with a great level of certainty. If you feel that you can afford the mortgage repayments even if interest rates were to increase, then perhaps now would be a good time to take the leap into homeownership.

However, it is important to update your budget for any additional costs relating to homeownership compared with renting.

I would recommend doing a budget starting with income, less all the expenses that you would have as a homeowner. You must remember costs such as homeowner’s insurance and rates and taxes, which you would not have had to carry as a tenant.

Ntebo writes:

I became unemployed and fell behind with my payments. I have found a new job now and intend to settle all my debts this year, but I don’t know where to start because I am already behind with a lot of my monthly instalments. I am not sure if a consolidation loan would help.

City Press replies:

If no legal action has taken place and you are now in a position to start repaying all the instalments on your debts, then you need to engage with your creditors proactively.

Contact each creditor and find out what your new instalment amounts will be, but keep in mind that these may have increased because you have fallen behind.

If you have several credit agreements, it may be helpful to use the services of a debt mediator, who can speak to your creditors on your behalf. A good starting point would be the National Debt Mediation Association – go to ndma.org.za or call 086 111 6362.

If the instalments have increased significantly, you may want to renegotiate the timeframe of the repayments to lower the monthly instalment, however, the best strategy is to repay as much as you can afford to avoid those interest charges.

If your credit record is still intact, debt consolidation could be a good option in your case because your financial issues were caused by a life event – losing your job – and not because of bad financial habits. Debt consolidation will allow you to take out a single loan and repay all the outstanding debt, and then you’ll only have one loan to repay.

Make sure you are dealing with a reputable credit provider and do the maths to make sure that your total loan repayments on the consolidated loan do not exceed what you would have paid to the various credit providers.

Xolani writes:

I have had 20 shares in MTN Zakhele since they came out. I am in no hurry to cash them, but would like to track their progress and maybe try to diversify my share portfolio by buying other shares with a portion thereof. My aim is to use these shares to augment my government pension. How do I follow their performance on the stock exchange daily?

City Press replies:

You can track the MTN Zakhele shares on their website, mtnz.co.za. You will see the share price at the top of the page. The shares would be worth about R1 260, which is not really enough to diversify. To be cost-effective, one needs to hold about R5 000 worth of an individual share.

You can consider buying an exchanged-traded fund (ETF) such as Satrix, which will give you exposure to the top 40 shares on the JSE through the purchase of just one ETF share. You can do this either by opening a stockbroking account with a company such as easyequities.co.za or by investing directly with Satrix through a debit order. Go to satrix.co.za for more info.

Tracy writes:

I met my husband after his divorce. The agreement when he divorced was that two properties would have to be sold and the money split between him and his former wife.

However, the process of disposing of the properties never happened.

I married him about four years ago.

My question is, do I have the right to sell these properties on his behalf, seeing that we are now married, so that I can finalise the payout to his ex, who is being very difficult and keeps changing her mind?

Soré Cloete, senior legal manager at Old Mutual, replies:

A lot would depend on the exact wording of his divorce settlement. For example, it may state that the ex-wife is entitled to “a” house, which may mean that the ex-wife is unsure about which house/proceeds she is entitled to.

Based on the information supplied, I would suggest that your husband sit down with his ex-wife and, with their lawyers present, determine exactly what should happen and then ensure that it is actioned.

But in general terms, whether you could sell the assets belonging to your husband would depend on your marital status. Based on the question, the “divorce debt” is still owed by your husband to his former spouse.

If you are married to him in community of property, you have a joint estate and both you and your husband can act on behalf of that estate. However, if you are married in community of property, both you and your husband would also need to agree to sell the assets registered in his name.

If you are, on the other hand, married out of community of property, you may not sell your husband’s assets on his behalf to cover his debts.

Ridwan asks:

I have been told that by splitting my monthly instalment into two payments over the month (for example on the 15th and the 30th of the month), I can save on interest, as interest is calculated daily, so the payment on the 15th reduces the capital outstanding for 15 days until the interest amount for the month becomes payable on the 30th.

I was wondering if you could elaborate a bit on this option and advise whether our local banks actually offer this option.

City Press replies:

You can certainly enter this arrangement, but remember that the payment on the 15th must go off early. For example, if your bond repayment is currently due on the 30th and you pay half of it on the 15th and then half on the 30th, you benefit from the interest saving, but you need to have that payment available earlier than normal.

If you only pay half on the 30th and then the next half on 15th, you will end up paying more interest.

Another way to cut interest is for your bond to go off the day after payday rather than at the end of the month.

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