Put your year-end bonus to good use | Everything Property
Advice

Put your year-end bonus to good use

In these challenging economic times, receiving a year-end bonus at the end of the year can feel like a much-needed lifeline

It is not a legal requirement, yet many employers give out Christmas bonuses as a gesture of goodwill and a ‘thank you’ to their staff for their hard work over the year. The size of the bonus varies as it is paid at the employer’s discretion, but according to the South African Payroll Association (SAPA) it is usually an additional month’s salary or 8.33% of the employee’s annual salary; and it is subject to tax.

“I would urge consumers to resist the temptation to spend their Christmas bonuses on unnecessary purchases such as lavish Christmas presents or an all-out fancy holiday, and instead think about long-term rewards and enhanced stability,” says Jackie Smith, Head of Buyers Trust (a subsidiary of ooba Group) – a safe and secure bank-hosted deposit solution for homebuyers.

Smith shares that a year-end bonus can be used in numerous ways to cover some of the costs involved in the home buying process, and believes that consumers should consider making this short-term sacrifice to help make the dream of successful homeownership a reality.

Put your money where your mouth is
“According to ooba statistics, the national average net monthly income of home loan applicants is R28,420 If this amount was received as a Christmas bonus it could cover a sizeable chunk of a deposit – one-quarter of the national average deposit of R127,567.”

Putting down a deposit decreases monthly repayments and helps buyers to secure more favourable interest rates from the banks. “Consumers should keep in mind that deposits generate interest until the transfer process is complete, and, with the higher interest rate of 10.5%, these extra earnings can be significant,” Smith says.

“Deposit interest earnings can be further maximized when using a third-party platform like Buyers Trust, that gives buyers full transparency of their investment and only costs 1% of all interest earned. This gives the buyer thousands of rands back in their pocket that they can later use to buy those ‘little luxuries’ that they might have spent their Christmas bonus on”.

“Alternatively, you can take it one step further and use deposit interest earnings to offset the transfer costs,” she adds.

Avoid overspending during the festive season with pre-approval
The festive season is notorious for being a time of unplanned overspending, and property purchases are no exception.

“Just as you shouldn’t blow your whole bonus on one designer handbag, it’s unwise to put in an offer on a home you can’t afford,” says Smith. “Getting pre-approval before you start the homebuying process is the best way to ensure that you go in with an understanding of what the banks are looking for and a realistic idea of what you can afford.”

There are two easy ways to get pre-approval:
1. Do it online using a free Bond Indicator
2. Speak to a verified home loan expert

Both methods require prospective buyers to submit their credit score and bank statements to calculate affordability, and once completed, issue buyers with a verified Pre-Qualification Certificate. “The certificate gives buyers a competitive advantage because sellers are more likely to accept an offer from someone who has proof that they can afford to follow through on the purchase,” she explains.

Finally, Smith urges consumers to think of their Christmas bonus as ‘the gift that keeps on giving’ when used for a practical, wealth- growing purpose.

Says Smith: “Remember – most Christmas presents depreciate as soon as they are unwrapped. A home is an investment that will only appreciate as the years go on and will end up being the most rewarding gift you could ever give to yourself.”

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