When should you think of buying your first home? When is it too early or too late? Really as soon as you start earning it should be on the cards. If you calculate how much you will spend on rent for even just the first five years of employment it makes sense to start thinking about buying.
Let’s walk through a fictional Kenyan home renter’s journey. Her name is Sarah. She’s been living in hostels all through university. She graduates and gets a good entry level job. After saving for about six months she feels she’s ready to make the transition to her own place. She chooses somewhere affordable. Her rent is 10,000/= a month. Too often that means living far from where she works. She stays there a year before the endless traffic jams get to her and she moves. She get’s an SQ (Servant’s Quarters) for 14,000/= where she lives for eight months. A new job and higher salary dictate that she moves. Her new apartment costs her 18,000/= She is there for a year before moving to a swankier side of town. Here her rent is 30,000/= she can afford it and it’s not a bother besides it’s in a good part of town. She lives there for two years and four months before she starts to think about buying her own place.
Let’s see what the math looks like:10,000 x 12 = 120,000
14,000 x 8 = 112,000
18,000 x 12 = 216,000
30,000 x 28 = 840.000
Total = 1,288,000
We all know this is on the conservative side. We’re not counting the increased living costs with each move, the new furniture and other new things we buy every time we move.
Truth is buying a home takes sacrifice.It means not moving when your salary increases but increasing your savings for a home. It means giving up what your peers are doing for a certain period of time to make sure that you achieve your home ownership goal.
When buying a home the rule of thumb is to have a large deposit. The larger the deposit the less your monthly payment and mortgage period. Both of those will work in your favor by reducing the journey.
Although you can get up to 90% financing based on your pay slip this makes it harder to make payments especially if you lose your job or are unable to work due to sickness or other reasons.
Generally it is advisable for one to have at least 1/3 of the value in savings and an additional amount for the legal payments and other fees that may come up during the transaction. When buying a property there are legal fees, property taxes, property insurance, life insurance among other fees that could be daunting. Another unexpected cost may be repair costs if the home you are buying is not new. In that case make sure you go inspect the property with the renovators so that you know exactly how huge the dent in your purse or wallet will be.
Do not be daunted by all of this. The minute you decide to buy a house the first thing to do is to start saving for the down payment. Most mortgage providers have savings accounts that enable you to achieve this goal. Saving with them also enables you to build a relationship with them prior to getting your mortgage and it works more in your favor as opposed to a completely new client. Shop around with the mortgage providers and if you like their terms, start saving with them.
All the very best and do let us know if you have any questions in the comments.