One of the most desired financial goals is to stop paying rent and have a home to call your own, but the costs involved usually make the dream seem out of reach.
Nevertheless, like any other financial goal, owning a home is achievable as long as you get deliberate about it and work towards making it a reality.
Obviously, this falls under long-term goals, which take some years and a substantial amount of money to achieve. Here are some things to consider if you want to start taking the steps that will lead you to the door of your own home.
Buying or building a house cheaply
COST
The cost of a home is a big obstacle for many people, but that should not deter you. Start looking around and get acquainted with the costs involved, whether by building or buying a ready-made home.
This will give you a sense of the kind of money you can expect to use to reach your goal. Be honest with yourself about what you can reasonably accomplish based on your income and remember that home ownership sometimes comes with huge sacrifices and cutbacks on non-essentials.
If you can find additional sources of income that you can channel directly to your home ownership goal, that might help you in buying or building a house cheaply.
You can also start saving for home ownership, because whether you are building or buying, you will need some money upfront to help you start or to pay upfront costs like the deposit, stamp duty, legal and other fees, in the case of a mortgage.
Savings towards home ownership in a registered home ownership savings plan are tax exempt (with limits of course).
Before settling on a place, compare prices in different locations and make sure the social amenities you need (such as hospitals, schools) are in close proximity. You can also find low-cost housing projects by looking around.
BUILD OR BUY?
Building your own home tends to be cheaper than buying a completed home. Buying a built house in cash is also cheaper than buying in instalments. The most expensive option is taking up a mortgage (home loan) to finance your home ownership dream.
Lawrence Mutua: Boy who sold scrap metals at Mukuru slums to join University in Canada
The costs of a mortgage can be up to double the costs of the other payment options. You can choose your path to home ownership depending on your budget and what you can afford to commit to that goal.
DUE DILIGENCE IN BUYING OR BUILDING A HOUSE CHEAPLY
Whether you are building or buying, you will need to do your due diligence to avoid falling prey to scammers. Tap into the expertise of a surveyor, lawyer and other professionals who can help you confirm that you are buying a genuine property.
When buying a ready house, have an architect assess it for you. Visit the site. Confirm what you are paying for and find out the history of the property.
Don’t be afraid of asking questions; don’t be conned because you trusted too much. Make sure that the environment is suitable in terms of waste management, availability of energy/electricity and accessibility.
Look around for potential houses during the rainy season to find out how they hold up to the rainy weather in terms of flooding and accessibility.
KEEPING COSTS LOW
When buying land to use to construct your home, consider areas that are not quite developed now, but have potential for development based on their proximity to a developing area or on plans for a major road that would open up the area in later years.
Such land might be more affordable to buy and keep as you save up on other home ownership costs. Another option is to buy a chunk of land as a group, subdivide and come up with your own gated community.
Some of the costs you can’t escape are legal costs (search fees, Land Control Board, consent to develop agricultural land if the land is outside municipalities), professional costs for a surveyor, valuer, architect, etc. Beware of trying to save money during the construction, some shortcuts may be fatal.
Have your budget and find out what it can reasonably do for you. Using alternative building technologies can help you save money and time, given that a big part of construction costs comes from construction materials.
For this reason you can consider interlocking blocks and other cost-effective building technologies. You can even opt for a container home as you work on building your home using the money you previously used on rent.
TAKING A MORTGAGE
The first question is how much of a mortgage you can afford and be able to pay based on your income and expenditure on other necessities.
For instance, if you earn Sh. 70,000 net, the whole amount cannot go towards paying the mortgage, given that you have other costs to meet.
You’ll also have to meet some upfront costs like lawyer fees, stamp duty, deposit and other related costs.
An alternative to a mortgage might be a construction loan from a Sacco or you can join a registered housing cooperative whose goal is to help members own homes.
OFF-PLAN HOUSING
This allows you to pay for a property before it is constructed, and thus is meant to be cheaper than buying a built house. Before you sign up, weigh your risks versus the gains in putting your money in that project.
Do your due diligence on the developer and whether they have built off-plan houses before without issues and how they are holding up in terms of wear and tear.
LEGAL ISSUES IN PROPERTY
You can protect any property you own before marriage with a prenuptial agreement (which are now legally recognised) which outlines protection for your property rights.
Make sure you have a will detailing how you want your estate to be distributed upon death, and that your spouse has one too.
Know what your husband owns and know what your property rights are to save you pain in case of your spouse’s death.
If you co-own property, make sure that the ownership document provides for joint ownership not tenants in common as this is affected by law of succession.
As with all other goals, start small and work your way to your goal of buying or building a house cheaply steadily.
This feature was written by FELISTA WANGARI. Ms. Wangari is a personal finance expert who runs the 52-Weeks Savings Challenge group on Facebook.
