The Money Makeover journey is almost at its end for this year and the contestants have learned some hard lessons.

If you haven’t yet, there’s still time to catch up and follow six ordinary South Africans as they take up the City Press/Absa Money Makeover Challenge and undergo a money makeover boot camp.

This is the last in a series of video Q&As that offer you the chance to ask your questions and learn from our contestants. To do this we tap into the Absa experts to help our candidates with any issues they may be facing that are also relevant to our followers.

This week Maya Fisher French and her guest, Zydah Manuel, portfolio manager at Absa Home Loans, discuss the many considerations there are before you buy a house and how to ensure you don’t default once you have.

In Part 1 of the episode, they cover some of the most common questions from those who follow the competition, among them:

1. How do I know I can afford a house?
2. How do I qualify?
3. What are the running costs?
4. How do I determine the appropriate interest rate?

Another set of important questions revolve around credit scores. Often people don’t know what a good credit score is, what it means and whether banks take other behaviours into account beyond credit scores.

In Part 2, the two discuss the importance of getting ahead of the problem if you think you might be likely to miss mortgage payments. Manuel gives an overview of what sort of behaviour changes and lifestyle edits the bank might expect to help people keep their homes. The bank wants people to keep their homes and have a number of interventions to help this happen, so it is important to keep open communication with your bank.

Sanet’s story: property is not a passive income

Property investing is believed to be a relatively ‘easy’ investment that allows you to create an investment portfolio paying a passive income, yet in reality it is not a passive investment.

Investing in property requires a great deal of homework, knowledge and financial management. You need to have cashflow, be prepared to manage tenants and understand the costs of holding property.

Apart from a mortgage, there are additional costs such as levies, rates and maintenance. All of these costs need to be considered before buying a property, whether it is as a home or an investment.

Money Makeover candidates Sanet and Marius bought an apartment as an investment for their daughter. Rather than being an investment, it has become a drag on them financially. What they had not included in their calculations was the high levy. They were able to rent the property to cover the monthly mortgage repayments, but they were out of pocket each month on the R3 000 levies and rates.

Zydah Manuel, portfolio manager at Absa Home Loans, says this is not an uncommon error made by investors.

Side bar: Prepare your finances

Whether you are buying a property as a home or as an investment, you need to prepare your finances says Manuel.

1Draw up a budget to determine income and expenses. Review your budget to ensure there is affordability to purchase a home and sufficient surplus to factor in interest rate hikes and all the associated costs for home ownership

2Check your credit score with the credit bureaus. You are entitled to one free credit report a year. 

3Do a pre-qualification for a home loan and know how much you could qualify for and shop with confidence

4Do a pre- qualification and know how much you could qualify for

5Prepare for the associated costs of purchasing a home:

• Sufficient funds to pay for a deposit
• Bond registration and transfer fees
• Bond initiation fees
• Insurance for the new home, both building insurance and household contents
• Moving costs
• Enquire about rates and taxes, and water and electricity for the property
• Rates and levies (in the case of sectional title).

Listen in and ask your questions on our dedicated social Twitter and Facebook pages, @CPMoneyMakeover