PROPERTY NEWS - The choice between renting and buying a home is important for many South Africans. While renting provides flexibility and fewer upfront responsibilities, owning your own home offers greater long-term financial benefits and security, says Samuel Seeff, chairperson of the Seeff Property Group.
Purchasing a home involves making payments toward an asset that you own, rather than paying rent to a landlord.
It allows you to build equity with each mortgage payment while paying monthly rent offers no return on investment as it is purely an expense.
As your loan balance decreases and the property value increases, you accumulate wealth. Homeownership turns a monthly expense into long-term savings and investment. It helps create an asset of considerable value which can be leveraged for future financial goals.
Importantly, says Seeff, owning your own home offers stability and value growth. It also offers the flexibility of being able to make future changes to your living space which cannot easily be done in a rental. You can therefore upgrade the home and add comfort to your lifestyle while increasing the value of the asset.
Owning a home also creates important stability, says Seeff, as it removes the uncertainty associated with renting. You do not have to deal with lease renewals, rent increases, or the landlord selling the property.
Property as an asset class has historically been a good investment and an effective inflation hedge, but always depends on where you buy, and how much you pay for the property, he says. As living costs rise, property values typically increase thus preserving your capital investment.
Where rents tend to go up annually, long-term homeownership can lower your monthly costs as the home loan repayments will largely stay the same, subject obviously to interest rate fluctuation.
You can also invest all spare cash, bonuses and the like into your home loan to further reduce it, or to accumulate savings for future use. It creates financial security, and can serve as collateral when needed.
Seeff, however, says that purchasing a home requires careful planning and financial commitment. The shift from being a tenant to a homeowner involves moving from paying for temporary accommodation to making an investment in a fixed asset, building long-term equity, and establishing a stable residence.
Owning your own home creates security and builds wealth.
A major benefit in South Africa is that you can finance your property purchase with a home loan over a period of twenty to thirty years depending on your age and credit profile.
A recent survey by ooba showed that first-time home buyers remain a considerable part of the property market and some 46.5% of their home loans over the last few months were from first-time buyers.
It remains a favourable time for those who are financially secure to invest in their own homes, says Seeff.
The banks remain supportive, and many are still granting full 100% mortgage loans, sometimes still with costs on top of that. The longer you wait, the more you will likely pay as property prices continue appreciating.
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