Owning your own home is very important.
Even though it may seem not so key to some people for now, when you retire you will realise the importance.
Those that plan well should, by the time they retire, have bought their own home and paid it off.
Can you imagine the stress of retiring and having to continue paying rent at the risk – no certainty – of annual rent increases.
It must be hell.
When you are paying rent, you are simply allowing somebody else to pay off an investment property.
By the time they retire, not only will they own an unbonded home of their own but they will own one or more unbonded properties that they let out for an income.
That is the position that you would like to be in.
Buying is more expensive than renting, for now.
To buy you need to pay the levy, rates and taxes and maintain the property instead of just paying rent.
The price of the property is fixed and the bond should be paid off over 20 years – you should pay more to reduce that time.
At the end of that time, your bond falls away and you only pay rent and levy.
Yes, bond rates, and thus your bond payment, can change over time.
We are likely to see a one percent increase in rates over the whole year but on an amount of R500 000, the extra is just R316 per month.
If you have followed my earlier advice, you will already have paid off lots off your bond.
The increase would only be based on the balance owing.
The reality is that your rental is likely to have been R5 000 per month on that place anyway and that with increased inflation the increase could well be 10 percent anyway – i.e. R500 per month and that will happen every year whereas for the owner interest rates that go up are just as likely to go down!
There is no doubt that the person that retires with a fully owned property is sitting in the pound seats.
If nothing else in our example they would have R5 000 a month tax-free extra money to spend compared to “Mr Rental”.
Does it make sense to you to own your own property now?
Should you need advice about buying or selling property, you may contact me via phone number 082 881 4711 or email address mike@platinumglobal.co.za
- Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.