Welcome to another week of financial learning. Today I want to tackle one of the debatable phenomenon in the realm of financial discipline; i.e owning a house.
Financial discipline is not just about knowing how to manage your finances and staying within your budget. It goes beyond that. It includes everything related to your comfort yesterday, today and tomorrow. In my financial teaching journey, I have come to understand that there are two classes of financial goals.
Financial discipline is not just about knowing how to manage your finances and staying within your budget.
We have core and elective goals. The core goals are things that we “must” achieve financially before we pass on. The elective goals are things that “want” to achieve.
BASIC CORE GOALS
In my view, the core goals are three (3).
- Education and Skill development-This goes for yourself and family.
- Owning a Mortgage
- Retirement Package/Insurance
BASIC ELECTIVE GOALS
The elective goals include the following;
- Marital engagements
- Transportation means
With the above said, I will like to tackle the second core financial goal today. Having a house in Ghana some years back was seen as the preserve of the rich. So the supposed rich people constructed a lot of houses in the major cities and rented them out. The working class was comfortable with renting until their retirement. They only encouraged their children to think about building houses for the next generation.
So you found an Ashanti who had moved from Kumasi and lived in a rented apartment at Lapaz for over 30 years and vice versa in Kumasi for the other tribes.
This is not the case today! Housing has become a necessity due to the densely populated manner of our capital towns and the high cost of renting a house. Let me start by saying this. If you start working and building a house does not become your priority then you need to revisit my first epistle Savings 101.
Beyond education, the next important financial goal you need to set for yourself is to build your house. Building your house here ca be buying the land yourself to build or going for a mortgage facility at a bank. Luckily, for us, we have a couple of good banks who offer mortgage facilities in partnership with some credible estate developers.
Having a sustainable place to lay your head is very important. Never defer that discussion to another day. It should be more important to you that that luxurious car or expensive wedding.
Sometimes we need to tell ourselves the truth without mimicking words. Only spend much money on your wedding if you have assured means of returns from it. Other than that, please ensure you go within your means and start the search for land.
One of the things that discourage people from building their houses beyond the mortgage has to do with the issue of “Land guards”. Truth be told, that is a big challenge in Ghana. I once had my land position changed twice by land guards because I failed to start any development on it.
Does that mean I should not try again? NO!
We sometimes even eat our own cooked food and are chocked. Nevertheless, we do not stop cooking and eating. See this building discussion as vital! I always advise people especially the young ones working today that, if after working for 10 years, you cannot boast of your own apartment then you have failed the next generation. An apartment here doesn’t mean a six-bedroom or Storey building etc. It can just be a 2-bedroom apartment that can harbor you and your family. Get that land. And start little by little. Set a cap of how much you want to push into that building project monthly.
Keep your eyes on the area you want to put up your house. What are the economic conditions there? What are the available social amenities?
What are the business prospects in the next 10 years? Have a thorough analysis of all these factors before choosing the place. Take your time to analyze your building plan and the Engineers who will be working on it.
Do not just buy land and start building because you have seen your friends doing the same.
A mortgage is another good option if you have very stable work. It affords you laxity of time to pay for the house. Some companies now advise their staff to go in for mortgage facilities and have deductions from their salaries monthly. This also takes off the pressure of going to the site, supervising the work, land guard issues, etc.
Most institutions require that the borrower make between 15 to 20 percent down payment of the total cost and the institution will finance the remaining 80 to 85% percent.
Nevertheless, you need to read the mortgage agreement well before signing. I always advise that the minimum mortgage duration one should sign onto should be 15 years.
This is however subject to your level of income. However, a 15-year period will give you the luxury of time and residue from your salary to tackle other core financial goals like your children’s education, having emergency funds, monthly retirement packages, etc.
The average 2 bedroom mortgage facility in Ghana now depending on the location is between GHS 100,000 to 150,000. With the above amount, should you take a mortgage at 25% for 15 years, your monthly repayment will be between GHS 2,500 and 3,200. It will reduce to GHS 2,517 if the duration is increased to 20 years. Think about this before you commit to this program.
Do not drain yourself financially with a mortgage when you can equally buy your own land and build at your own pace. You are not competing with anyone!!
I wish everyone a wonderful and memorable week!