Financial Literacy for Everyone
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Home loans

Most people buy a house at some stage during their lifetime. A house is the most important asset for many people. House prices usually increase over time; therefore a house usually appreciates in value.

It is very expensive to buy a house. How can you buy a house if you do not have the money to pay cash? A house is so expensive that you might never have enough money to buy a house in cash.

Most people buy a house with a home loan, also called a mortgage. You save for the deposit and then pay the house off in monthly instalments. You should aim to pay off a home loan in less than 20 years and before you are 55 years of age, because by then you might retire and it could become more difficult to pay the instalments.

Before you decide to buy a house:

  • Select a good location, which is an area where it will not lose value. You don't want to buy a house for R500 000 that is only worth R450 000 after five years. A house can lose value because a factory with bad smells opened next door, or because somebody built in front of you and blocked your beautiful view, or because a highway was built next to you.
  • Before you buy a house, go to the municipality and find out what new developments are planned for the area.
  • Find out what happens if there are heavy rains in the area: will the house be flooded?
  • Find out what the crime situation is in the area.
  • Inspect the house for faults with the structure, such as cracking walls or a leaking roof.
  • Make sure you can make the house bigger later on. If you can rent out a room or two it will help you to pay off the home loan.
  • Do not sign contracts unless you understand every word in the contract before you sign it. It is your right as a consumer to insist that all documents are written in plain and understandable language (according to the Consumer Protection Act, 68 of 2008, section 22).
  • The bank will only give you a home loan if you can afford the monthly instalments.
  • Save enough for unexpected expenses. For example, if you lose your job, or are in a car accident, you will have enough money saved so that you do not lose your house because you cannot pay the instalments.