The importance of protecting your home investment

Calculate how much you can afford

Buying a house is one of the most expensive purchases you will probably ever make. With Gill Marcus's recent announcement that the prime lending rate would drop to 8.5% there is some good news for first-time buyers. However, when looking to buy the home of your dreams remember that banks look at all of your financial liabilities and obligations:

• Banks are far more likely to grant a home loan if you have a deposit saved up. Additionally, a deposit will result in a more favourable bond rate which can save you thousands in interest payments over time.
• Add up all monthly expenses and those costs relating to the house (bond repayments, levies, electricity, rates and taxes, and property insurance) in order to verify whether or not they exceed your gross monthly income. Property24, for instance, advises that the cost associated with the house should not exceed 30% of your gross monthly income*.
• You can apply for a bond from as many banks as you wish. This allows you to compare interest's rates that best suit you.
• Remember to consider additional costs that will arise including transfer duties, attorney fees, homeowner's insurance, and the cost of hiring a moving company.
• It's important to take into account the current stage of your life. Are you living alone? Planning to get married? Starting a family? Take everything into consideration, as you don't want to purchase a house that doesn't meet your current and/or long-term needs.

Life insurance

There are a number of reasons you should consider life insurance when you purchase a house:

• As an income replacement tool, life insurance is there to provide a payment to your family should you die. This will cover any debt that you may have, including your bond.
• It ensures your children's school fees, tertiary education, and well-being are kept intact by creating a safety net for their future. This is a financial payout given to your spouse or children's guardian that will secure their future even if you are not around.
• In essence, life insurance policies mitigate possible risk or financial loss of a breadwinner's income as a result of death, disability or dread disease.

Shop around

Most banks offer you life insurance when you apply for a loan. Remember that you are entitled to shop around for comparative quotes. This also means you will have the opportunity to partner with a reputable and well-established insurance company who can guide you through this process.

Seek advice

While some consumers still prefer to research the market themselves, don't be afraid to seek the advice of a financial adviser who will take all of your finances into consideration. Partner with a reputable estate agency that will assist you in finding your perfect property.

As we go through various stages in our lives we don't just get older, but we get wiser too. However, in too many instances this wisdom unfortunately comes at the expense of experience and the lessons learnt. Sometimes this may even incur a financial implication or loss. Have the foresight to plan ahead and protect your investment!

*Important tips for first-time buyers.