Given our political history, it’s hardly surprising that South Africans take homeownership very seriously. Many young South Africans will be the first homeowners in their family. Like so many financial decisions, homeownership is emotionally charged. However, once you start running the numbers it’s difficult to make a financial case for buying a home.
In this episode of The Fat Wallet Show Simon and I open ourselves up to a world of outrage by doing the maths. We are unsurprised to find that owning a home is an exercise that has more to do with the feels than economics.
It is, of course, perfectly acceptable to buy a home for emotional reasons. If it makes you feel safe and happy to own your place, why shouldn’t you? We do encourage you to go through a similar process we went through in this episode before you commit to buying, though. Understanding the full financial impact of your decisions is a really big part of responsible adulting.
Below is a list of the factors we included in the price of buying a home. I assumed structural insurance is always part of the deal, but Simon pointed out that it might be included in levies. The insurance number was a thumb-suck based on what Simon, the homeowner, currently pays, with allowances made for smaller excess amounts. Before you start this calculation, phone your current insurer for a quote to get a more accurate number and confirm whether structural insurance is included in your levy.
- Home price
- Initiation fee: The fee your bank charges just to open a home loan account
- Interest rate
- Pay-off period
- Rates and taxes
- Maintenance: Either 1% rule, or R1 per square metre, which seems very low.
- Transfer duty
- Conveyance cost
The follow up show with listener comments, sums and more is here.
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