Is now the right time to buy a home?

Posted On Monday, 07 February 2005 02:00 Published by
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The interest rate is a lot lower than it has been in recent years giving people more buying power but enormous demand for property is pushing prices up
With interest rates at their lowest in years, many people are considering buying a new or first home.

Ed Grondel looks at the options available for investing in property and what prospective buyers should consider before they make that all-important decision

The interest rate is a lot lower than it has been in recent years giving people more buying power but enormous demand for property is pushing prices up.

There are still a lot of great deals to be had, but the watchword is caution.

For most people, buying a home is the biggest and most exciting investment that they will make.

It is an emotional experience as a home means security and it is the heart of the family.

However, potential home owners need to do their homework first and one of the big questions they need to ask is what can they afford.

A home comes with additional expenses such as rates and taxes, maintenance and a variety of insurance policies on the structure of the house, your possessions and even your life.

Buyers need to include these expenses in their budget to determine what repayments they can afford on a home loan.

Taking into account normal monthly expenses as well, the repayments on one's home loan should not exceed 25% of one's gross income.

Once the costs have been calculated, buyers should ensure any additional costs are taken care of.

These will include the costs of moving, upgrading security, and buying new curtains. One should also take into account possible future interest rate increases.

The biggest concern for home owners is still the fluctuating interest rate, but many banks are offering a variety of interest rate options which can help homeowners protect their investments and their financial health.

Consumers have enjoyed a number of prime rate reductions during the last year but there is speculation whether the interest rate will remain at its current level.

Consumers are taking action to maintain the lower monthly repayments they are now enjoying.

One of the options for customers is to consider fixing their interest rates.

The decision to fix one's home loan interest rate is not one to be taken lightly. There are pros and cons.

The advantage of fixing an interest rate means a homeowner can be sure of unchanging monthly repayments, which is always beneficial when monitoring monthly cash flow.

Borrowers requesting a fixed interest rate on their home loan will be evaluated on an individual basis, taking into account the applicant's unique needs and requirements.

FNB HomeLoans offers a fixed rate option over 12, 18 or 24 months, and while the fixed rate offered will vary in line with a customer's individual pricing profile, fixed rates are generally 1% to 2% higher than the prevailing variable interest rate.

  • Ed Grondel is CEO of FNB Homeloans
Business Day
Publisher: Business Day
Source: Business Day

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