Owning your home is one of the biggest decisions you are likely to make. For many it is like a dream come true. It is therefore important that the right questions be asked before you get into such an investment. Three key questions must be asked:
1. How much cash injection is required upfront?
- If you are purchasing a property comprising land and building, a minimum of 10% of the selling price is normally required. However if land is being purchased, a minimum of 20% of the selling price is usually required
- If you are building your home, and you already posses the land, a minimum of 10% of the building cost is normally required along with a cash contingency for cost overruns
- If the land is not owned, the 20% mentioned before for land purchase will be applicable along with the 10% of the building
2. Other than the down payment, are you required to meet any other costs?
It is considered adequate to estimate about 10% of the cost of the property to cover additional costs associated with the purchase of property. Our Home Acquisition Calculator can be used to obtain a clearer understanding of this cost breakdown. These costs are usually:
- Valuation report fee – Note that Banks require that valuation report be done by a valuator on their panel. Click here for this listing
- Negotiation or processing fee
- Mortgage indemnity insurance (if needed). If you are purchasing land and building First Citizens can provide up to 90% financing. Financing above 75% is covered by mortgage indemnity insurance which is a one-time insurance paid to the Insurer
- Costs to prepare the Deed of Conveyance and Deed of Mortgage
- Stamp duty charges associated with transfer of the property from the vendor to the purchaser
- Life Insurance (optional)
- Fire Insurance
3. The next big question is … What is the maximum amount I can borrow and how much of my salary can go towards my installment?
- At First Citizens, our normal lending criteria allows for financing up to 75% of the lower of the cost or value of the property. However, up to 90% financing is available for the purchase of house and land and 80% for land only
- It should be noted that the mortgage installment should generally not exceed 30% of your gross monthly income -i.e income before tax and other deductions
- If you presently maintain other loans including credit cards, hire purchase accounts then the monthly installment on the proposed mortgage facility together with your existing loan installments should not exceed 40% of your gross monthly income
- In the pre-qualification process age of the applicant is a factor in that the term of the mortgage loan should not go beyond the retirement age of 60 or in the case of self employed professionals age 65