Access Bond Facility – This allows you to deposit and draw funds from your home loan up to a set amount.

Agreement of Sale / Offer to Purchase – Contract is signed by a buyer and seller stating the terms and conditions under which the property will be sold

Annual Premium – This is the premium payable once a year in respect of a life assurance or a home owner’s insurance policy.

Attorney – When buying property two different attorneys are involved; Transferring and Registration Attorney. The Seller gets to nominate the Transferring attorney whereas the purchaser gets to nominate the Registration / Bond Attorney

Assessment – The bank’s assessed value of the property

Assessment Fee – This fee pays for the administration work that accompanies a property assessment.

BA Linked Rate – Rate linked to 3 month BA SAFEX rate which can be monitored on an ongoing basis. This option guarantees a fixed rate for three months. The rate will change every three months in line with the cost of short term funding rates. This type of product normally has a minimum loan size and a maximum loan to value qualification criteria.

Balance Sheet – Used for the recording of the financial positions of private individuals, companies, cc’s and trusts.

Bearer / Seller – The legal owner of a piece of property.

Bona Fide – In good faith.

Bond Costs – These are the conveyance’s fees, stamp duty and VAT. They are payable by the buyer to the attorney attending to the registration of the bond on behalf of the bank. Conveyancing fees and stamp duty are calculated on a sliding scale based on the bond registered.

Bond registration fee – The fee charged for the registration of the home loan in the buyer’s name

Bond Term – This is the original term of the loan

Borrower (Mortgagor) – An individual who applies for and receives funds in the form of a loan and is obligated to repay the loan in full under the terms of the loan.

Broker / Estate Agent – An individual who brings buyers and sellers together and assists in negotiating contracts for a client.

Building Contract – A Contract between the land buyer and the builder, outlining the specifications of the building.

Building Loan – A Loan granted to a buyer who buys a vacant plot of land on which he intends to build

Buyer’s Market – Market conditions that favour buyers. With more sellers than buyers in the market, sellers may be forced to make substantial price concessions.

Capped Rate – Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage can change in an adjustment interval and/or over the life of the loan.

Ceiling – The maximum allowable interest rate of a variable rate mortgage

Collateral – Assets (such as your home) pledged as security for a home loan by either yourself or a relative

Contract of Sale – The agreement between the buyer and seller on the purchase price, terms, and conditions of a sale.

Conveyance – The document used to effect a transfer, such as a deed, or mortgage.

Cooling off period – This clause is included in an offer to purchase a property under R250 000. It is based on a new law allowing first time home buyers the opportunity to change their minds within five days of signing the offer.

Credit Bureau – A credit bureau is a clearinghouse for credit history information.

Credit Report / Profile – A report detailing the credit history of a prospective borrower that’s used to help determine borrower creditworthiness. There are 2 main Credit companies used by lenders in South Africa, namely ITC and Experian. These companies collate credit history on individuals and companies, which they obtain from various sources in the retail market place and legal system. Your bank account history is another important source of credit information used by lenders in assessing your credit profile.

Credit Score – A statistical method of assessing your creditworthiness. Your credit card history; amount of outstanding debt; the type of credit you use; negative information such as bankruptcies or late payments; collection accounts and judgments; too little credit history and too many credit lines with the maximum amount borrowed are all included in credit-scoring models to determine your credit score.

Deed – Legal document by which title to real property is transferred from one owner to another. The deed contains a description of the property, and is signed, witnessed, and delivered to the buyer at closing.
Deeds Office – This is a government department whose task it is to attend to the registration of transfers of Immovable property

Deeds Office Registration Fees – These fees are charged by the Deeds Office for registering the mortgage bond and the title deed

Default – Failure to meet legal obligations in a contract, including failure to make payments on a loan.

Deposit / collateral – The deposit is the part of the purchase price of the property that you pay in cash up front and reduces the amount that you will need to lend. A lender prefers a deposit as it means that the borrower has a financial commitment, in the property and the home loan required is less than the current market value of the property. For this reason the loan to value concept is an important factor in negotiating rate concessions and obtaining loan approval with minimum supporting documentation. Collateral other than property is also taken into account when calculating your loan to value ratio.When a borrower does not have cash available for a deposit, other acceptable types of collateral security include, but are not limited to the following :Shares, fixed deposit, bank/company/government gurantees, debt free immovable property, life assurance policies.

Equity – This is the amount by which the value if a bonded property exceeds the amount owing on the loan
Finance Charge – This is the interest charged by the bank on the loan

Foreclosure (or Repossession) – Legal process by which a mortgaged property may be sold to pay off a mortgage loan that is in default.

Freehold – When you own the property and the land that it’s build on, and within building regulations you are able to renovate and or extend to the outside of your property.

Grace Period – Period of time during which a loan payment may be made after its due date without incurring a late penalty. The grace period is specified as part of the terms of the loan in the Note.

Gross Income – Total income before taxes or expenses are deducted.

Home loan Application – An initial statement of personal and financial information required to apply for a loan

Installment amount – This is the basic monthly installment amount payable on the home loan, excluding insurance or assurance premium, where applicable \

Interest – Charge paid for borrowing money, calculated as a percentage of the remaining balance of the amount borrowed

Interest Rate – The annual rate of interest on the loan, expressed as a percentage of 100.

Joint Liability – Liability shared among two or more people, each of whom is liable for the full debt.

Latent Defect – This is a fault or flaw that is not immediately detectable or is hidden from view on inspection of the property

Lender – The bank, mortgage company, or mortgage broker offering the loan.

Loan + Costs – This product allows the borrower to lend more than 100% of the property value. It is geared for the first time homeowner and allows the borrower to include registration and transfer costs with the purchase price of the home

Loan-to-Value Ratio (LTV) – This is the percentage the bank is willing to lend you, expressed as a percentage of the bank’s estimated value of the property and the loan amount requiredLoan to Value (LTV) = [home loan amount required divided by assessed property value] x 100 Home loans of up to and exceeding a LTV of 100% may in certain circumstances be granted, subject to an acceptable Affordability Factor and valuation of the property in question.

Monthly instalments – Over the term of your loan, you will repay your home loan by way of regular monthly payments of principal and interest. Monthly installments are normally paid to the lender via debit order from your account. During the first few years, most of your payments will be applied towards interest. During the final years of your loan, your payment amounts will be applied primarily to the remaining principal debt. The amount of your monthlyinstalment can be affected by changes in interest rate and changes to the principal amount of your loan. As a rule of thumb your monthly installment should not exceed 30% of your gross monthly income.

Mortgage Broker – An individual or company that arranges financing for borrowers.

Mortgage or Bond – An agreement between you and the bank, stating that the bank will lend you a certain amount of money in the form of a home loan, and that you will pay the bank back over a certain period, on a monthly basis, and at a certain interest rate.

Notice of Default – Written notice to a borrower that a default has occurred and that legal action may be taken.

Occupation – This is the date the buyer moves into the property

Occupational Rental – This is paid by the buyer to the seller at an agreed amount, if the buyer decides to move into the property before transfer of ownership takes place.

Offer to Purchase – This is an offer in writing from the buyer to the seller, which is usually prepared by the estate agent. Once signed, by all parties it becomes a legal and binding contract between the buyer and the seller

Power of Attorney – Legal document authorizing one person to act on behalf of another.

Pre-approval – A lender’s firm commitment on a loan and it enables you to enter into negotiations with confidence. A pre-approval includes a preliminary screening of a borrower’s credit history. Information submitted during pre-approval is subject to verification at application.

Pre-qualification – Pre-qualifying gives you a general idea of your borrowing power. It is the process of determining how much money you will be eligible to borrow

Purchase Agreement / Deed of Sale – Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.

Reducing / Step Down Rate – Regardless of whether the variable home loan interest rate falls or rises, the reducing interest rate option will apply for the agreed period (usually less than 5 years). This facility guarantees you that your interest rate will decrease by a set percentage every three to six months for the agreed period. Should this option be terminated before the expiry date an additional finance charge can be levied by the lender.

Registration – This is the process whereby ownership of the property is transferred form the seller to the buyer via a deed of transfer. Your home loan will be secured at the Deeds office as a mortgage bond.

Repayment Terms – The length of your home loan repayment period with the financial institution. The longer your repayment period the lower your instalments. The maximum repayment period is 20 years and is dependant on the home loan amount.

Second Mortgage – An additional mortgage placed on a property that has rights that are inferior to the first mortgage.

Sectional Title – An entire complex block of flats etc. divided into individual units, sold separately and no one of the owners has the right to extend to the property.

Stamp Duty – This is a tax obligatory by the government

Short Fall – Short fall is more likely when it comes to a building loan. This is when value in the property is higher than the bond granted from the bank. In other words the client has paid a big amount in cash and did not use the banks money.

For more info on Home Loans, Bonds and Mortgages please call us on (011)327-4489

www.mortgagepluscc.co.za

Banks start to ease up with bond applications

WITH banks beginning to relax their lending policies, there is support for a revival in the property market and now is the time to apply for a bond.

There should be a much-improved chance of being approved for a loan on favourable terms. Banks are again offering 100 percent loans and the current lower interest rates make it a better time for consumers looking to buy.

Before you even apply for a loan, check whether the property is affordable.

Determining the right price range is an essential first step to avoid wasting time looking at unsuitable properties.

A property finance consultant will take you through the exercise of establishing what you can afford, taking into account your specific financial requirements.

Monthly repayment affordability is generally calculated at 25 to 30 percent of joint gross income, but other criteria, including existing debt commitments, may affect the size of the loan that the bank will grant.

Remember that the hidden costs (transfer and bond registration fees) usually have to be paid up front and add a sizeable amount to the cost.

One way to ensure that the loan you apply for will be granted is to get a prequalification. Companies such as Mortgage Plus will, at no cost, prequalify you for a certain bond amount, which takes the stress out of applying for a bond once you have decided on buying a property. Another positive factor is that buyers who are prequalified are in a much stronger position to negotiate with sellers.

Bond applications may be declined for several reasons: you may not be able to afford the monthly loan repayments, or may require a 100 percent loan that would push the repayments beyond your reach.

Another critical consideration is your credit profile. This includes your employment history and consumer bureau results, which provide a picture of your debt and payment history. If the bank considers you a good credit risk, it will assess the value of the property to be purchased.

If this, too, meets all the relevant criteria, the loan is usually granted. The mortgage originator also often motivates the merits of a particular loan application to the bank’s credit manager.

To improve your credit record, cancel out-of-date credit cards and ensure that you pay all instalments by the due date every month.

To help the bank determine its risk, you will have to provide personal information such as bank statements, salary slips, a statement of assets and liabilities, a statement of your monthly expenses and information on your credit history, including whether you have ever been insolvent.

An originator can ensure you have all the correct paper work to avoid unnecessary delays.

Mortgage originators shop around and negotiate the best deal for customers for free. Obtaining a preferential rate of just 0.1 percent below prime can make a big difference to monthly repayments. But a mortgage originator must take more than just the rate into account and will structure a package to suit an individual.

To structure a package to suit an individual needs please phone (011)327-4489 or go to www.mortgagepluscc.co.za