To commute or not to commute

Property that is closer to metro areas or public transport is certainly more expensive than property further afield, but not having to commute has major benefits.

We might be stating the obvious when we note that property is more expensive when it’s situated close to the business hub of a town or city, but there are two burning questions which have to be asked: in the long run, is it cheaper to live close to your workplace; and is it only about the money or should you be considering your health when deciding where to live?

Much has been made of the fact that property situated close to Gautrain stations is more expensive than that which isn’t near a public transport route. Likewise, properties that are within walking distance of work generally cost more than do those in outlying areas. In the old days properties in the more built up areas appealed to the younger generation who would gladly live amidst all the action before they settled down and moved to the suburbs. These days however, perhaps in part due to security concerns, more and more families are opting to stay out of suburbia and remain in areas that aren’t only closer to the work place, but are also close to good shopping facilities.

Although South Africa cannot really compete with Europe as far as transport facilities go, a growing number of our cities have improved their public transport offerings greatly over the past couple of years and it’s now easier to get around metro centres than ever before. We may not have reached the stage where we are prepared to forgo our cars completely, but there are many instances where South Africans only use their vehicles for recreational purposes.

Let’s face it, life would be a lot cheaper if we didn’t have to fill our vehicles with fuel, replace the tyres or fork out for the annual service. Obviously, the more you have to drive, the harder all of the above will be on your pocket but surprisingly, it’s not only the cost of the commute that’s impacting on people’s lives. Forbes ran an article a couple of years ago which addressed the stresses linked to commuting. It quoted a study conducted by Canada’s University of Waterloo which found that there was a direct link between the amount of time spent commuting and personal well-being. The study concluded that people with the longest commutes had the lowest overall satisfaction with life.

Interestingly, the study also found that time spent commuting is linked to a sense of time pressure and that those who spend the most time on the road experience higher levels of stress because they constantly feel hurried. Many spend their time on the road worrying about the work or activities they are missing. Unfortunately it’s also been shown that commuting times impact negatively on physical and mental health. A similar study undertaken in Sweden in 2011 linked long commutes with higher illness-related work absences, regardless of whether the commute was made using their own or public transportation.

The traffic on South Africa’s roads has become, for want of a better word, insane over the past few years. It’s nothing to hear that it can take over an hour to drive a few kilometers during rush hour in an urban area or take hour upon hour to travel from one side of a city to the other. Of course, some trips are unavoidable, but it’s probably going to make a great deal of financial sense to buy a home close to your workplace as opposed to something further afield. Yes, you may change jobs and in the worst-case scenario will have to move closer to your new workplace. However, property prices are based on demand and you will in all likelihood make a decent profit on the sale, allowing you to buy an equivalent – or better – property in a more proximate location. Having more time to spend with your family is going to impact on your life and it can only be a win-win situation if you manage to save some of your hard-earned cash in the process.

Source : Private Property

Are you financially prepared to own a home?

Thinking of buying a home? Before approaching your bank for finance, consider these questions to determine if you’re financially prepared for homeownership.

“If you have made the resolution of purchasing a home during 2017, you will need to ensure that you have assessed your financial situation and answered a few pertinent questions before approaching your bank for bond approval. Currently, only around 65% of first-time buyer bond applications are approved, which highlights the importance of being financially prepared before applying,” says Goslett.

He provides a few financial questions that you should answer before approaching your bank for finance:

What is my credit score?

A favourable credit score and clean credit record is a valuable asset when applying for a home loan. Each year consumers can obtain a free credit report from the credit bureaus within the country to assess their finance position. Goslett says that it is advisable for you to know your credit score and check your credit record for any inaccuracies. “Any missed or slow payment will have a negative impact on a consumer’s credit score. However, it is also important to be mindful of the less obvious credit infractions such as opening too many accounts, numerous credit enquiries, co-signing for a third party or only paying the minimum required payment. All of these things will impair your records and could scare off lenders,” Goslett explains.

What is my annual income?

As a potential homebuyer, the maximum bond amount that you can qualify for is based on your annual income, so be sure to include any bonuses or annual investment returns when making this calculation. Your annual tax return documentation will assist in determining your actual yearly income.

How much debt do I have?

Another major consideration that banks take into account when determining the home loan amount they are willing to grant is the applicant’s amount of disposable income. “To increase the disposable income you have available, get rid of or pay down debt as much as possible. Lenders will require you to provide them with all the debt you currently have to work out a debt-to-income ratio, which will be used as a tool to determine your level of affordability,” says Goslett. “Having a lower debt-to-income ratio will be highly beneficial as it will increase the chance of gaining approval for a higher bond amount.”

What is my financial worth?

Banks will want to see the documentation that relates to any assets, such as vehicles, investments and income-generating properties. Goslett says that all of these aspects add to an applicant’s nett worth and will have a bearing on the amount that the bank is willing to grant.

What kind of deposit can I put down?

According to bond origination company, BetterLife, the average cash deposit required by first-time buyers is 12.3% of the purchase price of the property. Based on the average home price paid by first-time buyers of R739 000, that equates to a cash amount of around R90 000 – not to mention the other costs associated with a home purchase such as transfer fees, attorney fees and bond costs.

What can I afford?

In an ideal situation your monthly home payment, which includes the bond, interest, taxes and insurance should not make up more than around 30% of your income before taxes. It is impossible to get an idea of your affordability levels by using an online bond calculator or consulting with a professional financial adviser. “Even if the bank has approved a certain amount, it is not necessary to find a home at the maximum bond amount if you feel you won’t be comfortable with the monthly repayment. Owning a home is a long-term investment that needs to be sustained for the term of the loan, so it is advisable to purchase a property that you can comfortably afford,” says Goslett. “Financial preparation is the key to home ownership readiness and will make the bond application process far smoother,” he concludes.

Source : Private Property