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Let’s go deeper into the question “How much more should you buy than you can afford?” by breaking it down into the real-life logic, risks, and when it might make sense to stretch your budget.
🏡 1. What Does “Afford” Really Mean in Property Buying?
When banks or financial advisors say “afford,” they mean:
✅ You can:
- Pay the monthly bond repayment
- Cover rates & taxes, levies (if sectional title), insurance, maintenance, and utilities
- Still have money left for living, saving, and emergencies
💡 General Guideline (The 28/36 Rule):
- Housing costs = Max 28% of gross income
- All debts (home + car + credit + store cards) = Max 36% of gross income
Example: If you earn R30,000/month gross:
- Housing = R8,400 max (28%)
- Total debt = R10,800 max (36%)
🔺 2. Why People Consider Buying More Than They Can “Afford”
Here are reasons people stretch their limits:
| Reason | Risk |
|---|---|
| Expecting salary increase soon | It may not happen, or costs might rise faster |
| Buying in a hot location likely to appreciate fast | Property may not gain value or may take time to resell |
| Low interest rate (like a 5-10 year fixed bond) | Interest rates can eventually rise — increasing monthly costs |
| FOMO (Fear of Missing Out) | Can lead to poor financial decisions |
🧠 3. If You Want to Stretch, Here’s a Smart Limit
- Do not stretch more than 10–20% above what you technically qualify for, and only if:
- You have zero other major debt
- You have 3–6 months of emergency savings
- You’re disciplined enough to cut spending in other areas
Example:
- Your bank says you qualify for a bond of R1.2 million.
- You could stretch to R1.32–R1.44 million (10–20% more)
- But you must account for:
- Bond registration fees
- Transfer duty
- Home insurance
- Unexpected repairs
- Lifestyle sacrifices (holidays, dining, etc.)
⚠️ 4. Risks of Overbuying
Here’s what happens when people buy too much house:
- House Poor
- You have the house, but can't afford anything else — no holidays, no savings, stress every month.
- Interest Rate Shock
- In SA, the repo rate can swing. A 1% increase on a R1.5m bond = ~R1,000 more per month.
- Default Risk
- Missed payments can damage your credit and eventually lead to repossession.
- Asset Illiquidity
- Selling takes time and money. You can’t just “undo” the decision quickly if things go wrong.
✅ 5. When Stretching Could Make Sense
| Situation | Why It Could Work |
|---|---|
| You’re early in your career, with strong income growth | You’ll grow into the bond |
| Buying in a high-growth area with solid resale value | The asset will likely appreciate fast |
| You're planning to rent part of the home (e.g., cottage) | Passive income helps fund repayments |
| You’ve built a strong emergency fund | You’re covered if anything goes wrong |
🧾 6. How to Know YOUR Limit
To decide wisely:
- Use an online bond calculator to see what monthly repayments would be at current interest rates.
- Add 20% extra for homeownership costs (maintenance, insurance, rates).
- Ask: Can I still afford my life — savings, groceries, emergencies — after the bond?
📌 In Summary:
- Recommended: Buy within your budget, based on realistic income and costs.
- If stretching: Do it carefully — no more than 10–20%, only if you’re confident in future income and backed by savings.
- Never assume things will work out — plan for worst-case scenarios.
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