Here's what you need to earn to buy a R1,2 or 3 million home these days
PUBLISHED 12 OCT 2020
The Reserve Bank’s decision to slash interest rates to levels last seen a generation ago has reassured home buyers across South Africa - and the positive effects are being felt in Cape Town too.
As bonds become more affordable and homes on the market appear at competitive prices, you may be gearing up to buy the Cape Town home you always wanted - but how much do you need to earn to finance your purchase?
R26 000 could be the magic number
With the prime lending rate at 7.00% you could finance a R1 million home at 100% bond and pay an instalment of R7 753 a month - but you’ll need to earn significantly more than that to qualify for financing.
- Bond applicants need to meet certain affordability criteria - and you should aim at earning more than three times the value of your instalment in order to qualify.
- A R1 million bond will require a monthly income of at least R26 000, with this amount increasing to R 52 000 and R78 000 for a R2 million or R3 million loan respectively.
It’s important to note that these income levels are safe minimums. You may not want to borrow to the maximum of your financial abilities because interest rate increases in future years could cause your instalment to rise rapidly.
Low rates are a great opportunity to invest in a home
If you’ve been renting in the Mother City, now could be the perfect time to take the leap into home ownership.
The unprecedented drop in interest rates means that renting a property isn’t much cheaper than paying a bond instalment - and you’ll enjoy the added benefit of owning your own home which could appreciate in value over the years.
If you’d like to explore your purchasing options in the R1 million to R3 million price range, we’d love to take you through our portfolio of residential properties in Cape Town. Contact us today.
Image Credit: https://pixabay.com/photos/house-money-euro-coin-coins-167734/