BY WACEKE NDUATI-OMANGA
Owning your own home is a goal sought by many. Here are some of the issues to consider as you work towards this.
i) Find a reputable property agent in your area of interest to assist you with the research. Property websites and magazines can also help with the search process.
ii) You can choose to buy your home off plan (i.e. before construction is complete) or buy an already finished house.
iii) Analyse the finance options for your home. Are you buying it in cash or will you be seeking a mortgage? (see mortgages below)
iv) Make an offer on the house to the seller
v) Once it is accepted sign a purchase agreement. You will usually be asked by the seller to pay a deposit as the other purchase conditions are completed. Ensure you have a good lawyer to help you with this process.
vi) Conduct a valuation on the house to ensure you are paying fair value for it.
vii) Ensure that you purchase homeowners insurance.
Mortgages.
A mortgage is a loan secured by a property. Things to consider as you evaluate using this financing option are as follows:
i) Do your research on the various interest rates charged by banks. There are Fixed Rate Mortgages and Adjustable Rate Mortgages. The rate charged on fixed-rate mortgages will not change over the term of the loan but the rate charged on the adjustable may fluctuate in tandem with general market interest rates.
ii) Most mortgage lenders require down payment of between 10% to 30% of the purchase price of the property. The higher the down payment the smaller the monthly repayment will be.
iii) Your monthly repayment will constitute both Principle and Interest. In the early years most of your repayment will be going towards the interest and in the latter years of your loan, most of the principle will be going towards the principle.
iv) Over the term of your mortgage, it is likely that your interest payment alone will constitute on average two times the value of your property at current market interest rates. It is therefore highly advisable to make optional additional payments towards your principle as this significantly reduces the amount of interest you will pay over time.
How much of a home can you afford?
It is important that you still have money left over for other investments and savings even after your monthly repayment. Owning a home can never be the only thing you work towards. You still need to prioritize and invest in other areas that will grow and create a source of income for you particularly post-retirement.