The benefits of homeownership

By Bank Windhoek’s Market Research Analyst, Loide David.

When is the best time to purchase a home? Early in our career or when your finances stabilise? What are the benefits of being a homeowner? This article explores these questions and more.

Buying versus renting: Buying a house allows you to control the asset as there are no annual rental increases. When you buy a house, your monthly instalments will not change unless you refinance, or when interest rates fluctuate. The first few years might be financially challenging, but as you become more established in your career and your remuneration improves, it becomes more affordable. 

Freedom and wellbeing: Homeownership offers the freedom to create a living environment that you prefer. You can model it to your style and personality. Studies by The National Association of Realtors claim that homeownership leads to better mental and physical health, improved community engagement, and higher educational attainments.

Building equity and security: Paying your mortgage over time allows you to build monthly equity with an asset you can rent, sell, or borrow. You can get funding against your home equity to meet various financial obligations, such as home improvements, education, and medical expenses. Homeownership safeguards your financial future through repaying the loan amount before your retirement, and the value of the property is likely to have increased significantly.

Savings plan and wealth accumulation: You embark on a savings plan when paying your mortgage. You can boost your saving by adding an extra amount that exceeds your instalment amount. This reduces both your instalment period as well as the interest you pay. The United States’ Harvard University, Joint Center for Housing Studies Properties, regards homeownership as protection against inflation, since home values typically increase during times of inflation, meaning buying a home early in life will minimise loss of wealth due to an increase in the property’s value. 

Creditworthiness: An obligation of paying a home loan will instil fiscal discipline and boosting your creditworthiness. This means that financial institutions will consider you suitable to receive their assistance as a result your reliability. 

Affordable funding available

With Bank Windhoek’s recently introduced extended mortgage loan, you now have a chance to buy your own home. This product hinges on three significant differentiators; firstly, it is developed for first time home buyers. Secondly, the desired property must cost between 500 000 and two million Namibian Dollars, and thirdly, mortgage instalments are calculated over 360 months, making homeownership highly affordable, especially for the first few years of repaying the loan.

The extended repayment term has opened up the possibility of many individuals, such as the younger first time buyers, to have the opportunity to afford a property. With the current economic conditions and the impact of the COVID-19, a lower mortgage payment means you can put more away for other necessities. 

Opportunity to increase your savings: The Bank’s extended repayment terms also allow homeowners to have more disposable income. With the surplus, you can settle other debts or renovate your house and increase your property value. After accomplishing these goals, you will be able to add extra money to your mortgage payments voluntarily. It is a favourable way to save on interest and settle your loan faster without committing to a shorter term.

The Bank’s property consultants can offer advice on the best mortgage term. However, they cannot decide for you. Therefore, select a term you can handle by asking yourself these questions:

• Is your budget fixed, or does it fluctuates monthly?
• From your monthly income, how much can you commit to payments?
• How do you foresee your future in the next five to ten years? 

Examining your monthly budget and long-term goals will help you determine the best term, when in doubt of your ability to sustain higher payments, choose the longer term.

Homes offer security and shelter from the surrounding environment. They are places where you can keep your belongings and express your character within your home’s surroundings and décor. Embrace your journey to owning your own home by contacting Bank Windhoek today, and who knows, with the economic environment; with low interest rates and an extended home loan, this might be the best time to buy your home.