Making an offer? These life events could affect your home loan

Most of us secure home loans with a repayment term of 20 to 30 years. This is a very long period of time, especially when you consider what can happen during a period of so many years. Whether you get married, divorced, have a child or lose a partner, in one way or another these life events can affect your home loan repayments. That’s why it is important to think about these events before you decide to buy a house.

Tying the knot

Whether you’re getting married for the first or second time, before you tie the knot, you should consider what will happen to your home loan. If the house is in your name, will you keep it in your name or will you opt for co-ownership where both partners are responsible for the outstanding debt? It’s also important to think about how you will be married – in or out of community of property or out of community of property with accrual. The regime you choose will affect the repayment of your home loan. It’s a good idea to speak to a financial advisor to make sure you are prepared for every eventuality. 

Going your separate ways

No one likes talking about divorce, but it is critical to consider what will happen to your home if you decide to part ways. Either you sell the family home, pay off the loan and split what’s left. Or one spouse can take over the instalments, while the other takes full ownership of another asset of equal value. Either way, you could face double the repayment every month because you are now paying the full amount on your own. Be sure to budget carefully to make sure you can afford the increase in instalments.   

New kid on the block

It is common for married couples to grow their families while paying off a home. The question is, will your home provide enough space for a new addition to your family? If your home is big enough, it is good to budget for a higher water and electricity bill because another person, no matter how small, will mean using more of these utilities. Also, add some flesh into your budget for other expenses such as school fees, medical costs, clothing and general day-to-day food and living expenses. These extra costs could put a strain on your finances, which includes your home loan repayments.

Retrenchment

Getting retrenched can be a traumatic experience. With the majority of businesses taking strain in difficult socio-economic conditions in South Africa, more people are facing retrenchment. You can proactively prepare for this loss of income by taking out insurance that covers your bond repayments for a specified period of time if you are retrenched. Although it is an extra cost, it will help you keep your home until you find other work.

Tragedy

What do you do if your partner suddenly passes away, especially if he or she is the breadwinner? It is critical to have a plan in place, even if it doesn’t happen. There are also insurance offerings that pay off the outstanding amount of your bond, if a partner passes away. If you and your partner can’t pay your bond off on one salary, this insurance is a must. Losing a loved one is hard on the whole family. Trying to finance a bond on your own can add a financial burden during a very difficult time. With this insurance you can grieve without the added financial pressure. It will also give you breathing space if you decide to sell your home in exchange for something smaller that will cost you less.

The start of your golden years

We will all retire one day. To live out your retirement dreams, your best bet is to make sure your home is paid off before you retire. If this is not possible, you will need to calculate if you will still be able to afford your bond repayments when you change from earning a salary to taking a pension. Retirement is also a good time to downscale because your children should all be out of the house by this stage. A smaller home will decrease your monthly repayments and will also reduce maintenance and general homeownership costs. You need to decide what will work best for your unique financial circumstances.

Your home is probably your biggest asset – thinking ahead and proactively planning for these events will safeguard your home and give you peace of mind!