If the opportunity ever arises for paying a cash deposit on a property, it should be grabbed with both hands. You may have saved up your money for a long time, you may have come into a large sum of money through an inheritance or prize winnings or you may have built up enough equity from a current property to place a cash deposit on a subsequent property. No matter what the reason, if you have the cash, paying a deposit on a property could be one of the best decisions you will ever make. There are numerous reasons for it being a great idea, below we elaborate on a few.
There are two characteristics of the current property market; stringent measures of obtaining finance and the challenges of selling a property quickly, which means that cash is still king when it comes to property sales.
The advantages of a cash deposit on property
- The amount required for a bond is greatly reduced, thus reducing your monthly repayments considerably. This will hopefully leave you with some spare cash in your pocket at the end of each month, maybe to put a bit extra into the bond too, bringing the overall amount paid down even further.
- The banks look more favourably at home buyers who have cash deposits, generally offering better interest rates on bonds, which over the duration of a bond could mean savings of thousands if not tens-of-thousands of Rands.
- If you only want to invest in property, you should seriously consider spreading your risk by using your cash to put down deposits on two or more homes and obtaining a loan for the remainder of the purchase price in each case. There could also be tax benefits in owning one or more rental properties.
- Property is one of the best investment vehicles and has been for many years. Most of the richest companies and individuals have all got a diverse property investment portfolio, so not only is your money invested safely, but the growth over time is more difficult to match in most other financial sectors.
- A cash deposit ensures that the bond amount is lower as mentioned before. This, in turn, ensures that if you ever become cash strapped in future you need not dip into those cash reserves. A property valuation by your bank will allow for a loan amount to be taken out for the difference between the bond amount owed and the value of the property. This has many advantages in its own right and can help cover other high-interest debts.
Obviously, how you pay for your home is a personal decision, which is why it’s extremely important that you seek professional help from your preferred local estate agent to make a proper assessment of your overall financial situation and long-term investment plans before committing to anything concrete