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Given the current economic climate, many homeowners in South Africa might find themselves facing the challenge of keeping up with their monthly bond repayments. In such instances, it may be tempting to consider selling the property to relieve financial pressure. However, before you make a hasty decision, it is crucial to understand all the factors involved and seek expert advice.
Owning a home is a significant financial commitment and one that needs careful consideration, especially when financial circumstances become strained. A knee-jerk reaction to sell may seem like a straightforward solution, but it’s not always the wisest course of action. There are several elements to consider before you take the plunge and list your property on the market.
Firstly, you need to evaluate if selling your home would be profitable. The profit from a sale isn’t solely determined by the selling price and the remaining balance on your bond. Instead, it’s crucial to account for all the expenses that you have incurred during the tenure of your ownership. Costs such as transfer duties, conveyancing fees, bond costs, rates and taxes, interest paid on the home loan, home renovations, repairs, levies, and additional security all play a part in determining your profit or loss.
Additionally, keep in mind that the sale of a property often involves paying a commission to the estate agent, which can be a substantial sum. If you have been renting out the property, the rental income received could offset these expenses. However, if the property is your primary residence, consider the rental costs you would have incurred over the same period. Once you have factored in all these elements, you can calculate your break-even value. This is the minimum selling price you would need to cover all costs associated with the property. If the calculated value is less than the potential selling price, then selling your home may be a profitable venture. If not, you may want to reconsider your options.
If you find that the loss is too significant, there are alternatives to consider before deciding to sell. For instance, if your property has additional accommodation like a cottage or flatlet, you could consider renting these out for extra income. Similarly, you could also rent out the entire property and move to a more affordable residence until the bond has been paid off, and the market value increases. Moreover, reassessing your expenditure and making necessary budget adjustments can also ease your financial strain. Cutting back on non-essential expenses and prioritising your bond repayments should always be your first step when struggling with affordability.
Finally, if you find that your financial situation is stable and you have some extra cash left over at the end of the month, consider increasing your monthly bond repayment. This approach will enable you to pay off your bond quicker, reducing the overall interest paid and bringing you closer to full ownership.
While selling your home might appear to be a quick fix to your financial woes, it’s important to weigh all your options and consider the long-term implications. Property is indeed a valuable asset, but it is important to manage it wisely to ensure it remains a beneficial investment. If you find yourself struggling to make decisions, it’s strongly recommended to seek expert advice to guide you through the process. Remember, the choices you make today can significantly impact your financial future. Choose wisely and ensure you make informed decisions that will secure your financial stability in the long run.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)