Now is the ideal time to make the switch from tenant to homeowner

Most South Africans aspire to own a home, but are still under the misperception that they are unable to qualify for a bond. According to research by credit bureau TPN, more than half of tenants don't think that they can afford to buy. Younger tenants especially are concerned about affordability, with just over 60% of tenants between the ages of 18 and 29 years saying that they won't be able to afford a bond. This drops slightly as tenants get older, with just over 50% of tenants in their thirties saying they can't afford to buy. But most of them can. The five consecutive repo rate cuts of last year resulted in a massive shift in affordability.

With the prime lending rate dropping to a record low of 7%, home buyers are now able to afford 30% more than they were at the start of 2020, when the prime lending was at 10%. Now is actually the most opportune time for aspirant buyers to apply for a bond.

Research shows that people are starting to acquire assets such as cars and property at a younger age, starting from the mid-twenties. This is also a time when many are starting to earn good salaries, and their spending power is starting to increase. The question many ask is, what price range of property could I afford?

Work out how much home loan you can afford here

A buyer would need to earn about R26 000 to qualify for a bond to buy a home of just over R1 million, if the bank offered a bond at the prime lending rate of 7%. The monthly installments would be about R7 800. Last year, when the interest rate was at 10%, someone with the same salary would only have been able to afford a home of just over R800 000.

Aspirant property buyers to check their credit score and financial records so that they know how much they can afford before they start searching for their dream home. Those with the means to invest in property should make the most of the current lending environment. Not only will they acquire an asset that has proven its resilience in challenging economic times, but they will have access to the funds in their bond, should they need it in the future. In this way, paying off a bond is much like a forced savings account, with a competitive interest rate.

The credit bureaus specifically look at the following factors when calculating your credit record:

Your debt repayment history

Amounts owed

Types of credit applied for and how often

Length of time your accounts have been open

How much of your available credit you are using

Default history where you have not honoured a debt obligation that resulted in a judgement against you

Knowing what you can afford, and how to apply for a bond, will go a long way to changing the perception that homeownership is unaffordable. With the current low interest rate, now is the ideal time to make the switch from tenant to homeowner or property investor.