Buying a new home is exhilarating, and in all the excitement of moving in, there’s always the temptation to splurge on new furniture, curtains and appliances to make everything picture-perfect.
Your primary objective as a new homeowner should be to keep improving your financial position.This is especially true when your inbox and social media pages are suddenly overflowing with attractive special offers that all seem tailor-made just for you and your new home.
However, it’s important that you resist spending any extra money at this time. He says rather work on rebuilding your savings or perhaps even on paying a little extra off on your home loan every month and gaining more equity in your property.
If each month you pay an extra R400 into a bond of R1 million, you’ll save R176 068 and shave off 2 years and 3 months on a 20-year term.
Try the Additional Monthly Payment Calculator to see what you’ll save.
According to Everitt, for most people, and especially first-time buyers, a home purchase is a major undertaking that can leave you financially stretched. You may have used up all your savings on the deposit and transfer costs, for example, and moving itself always costs more than you think it will.
“Then there is insurance to think about, the municipal reconnection fees for water and electricity services, the cost of moving or installing a new telephone or internet line, new school uniforms perhaps, the admin and sign-on fees for the new school, new gym or new security company… and the list goes on.”
Meanwhile, he says you also need to make provision for possible future increases in everyday costs such as the petrol price, electricity tariffs, medical aid contributions and school fees, as well as for regular home maintenance and any future interest rate increases because if you don’t, you run the risk of losing your home because you can no longer afford the monthly repayment.
Consequently, Everitt says your primary objective as a new homeowner should be to keep improving your financial position, by quickly paying off any extra debt you may have run up, then rebuilding your emergency savings fund and then diverting any extra income you may have into your home loan account so you won’t be caught out if interest rates rise or if you need to relocate sooner than you thought.
He says in most cases this will mean that new owners really must put off the purchase of that stunning new coffee table, the new linens that would be perfect for the spare bedroom or the new expresso machine – disappointing as that may be.
In compensation though, he says you should shortly have greater peace of mind about your finances and about the savings in interest that you will generate if you keep paying extra cash into your bond. Over the next few years, these could be worth quite a few coffee tables, he says.
