6 Tips for a successful mortgage application

As a young South African, buying property might not be at the forefront of your mind but with interest rates in South Africa relatively low and property prices at a realistic level compared to the recent boom, now is a great time to get onto the property ladder. And with banks granting first time home owners mortgages of up to 104%, you don’t need to spend years saving for a deposit.

When the time does come for you to apply for a mortgage, you don’t want to find out that you aren’t eligible because of a low or non-existent credit score. A bit of preparation can pay off in the long run and you should start considering what you can do now to make your mortgage application easier when you want to buy.

Make debt

A good credit rating is one of the most important factors in having a mortgage approved to finance a property. The only way to get a credit rating, ironically, is to have debt. Your overall credit rating is calculated according to a number of factors with different weightings, resulting in a score of between 300 and 800. As a general rule of thumb, your credit rating needs to be at least 640 for the banks to consider you credit-worthy and a low risk.

Then manage it well

Before you rush out and spend on credit, banks also want to see evidence that you can manage your debts well and pay them on time. So much so that the payment history on pre-existing loan accounts contributes 35% of your overall credit score and outstanding amounts owed contributes 30%.
Remember though that it is not only “formal” loans such as store cards, credit cards, student loans and car loans that contribute to your credit history. Not paying other bills such as traffic fines can also have a negative impact on your credit score.

Don’t wait, act now

Other factors that affect your credit rating are the length of your credit history, new credit accessed and the type of credit involved.
So, before buying a property, you should carefully build a good credit history by accessing appropriate debt and then managing it well.

Credit card conscious

One good way to do this is to use your credit card for expenses but then pay off the balance at the end of every month to avoid being charged interest. Another credit card-related tip is to never use more than 50% of the amount you have available to you. If you are constantly reaching your limit, this shows the bank that you are living right on the edge of your income.

Get a full-time job

Banks will insist the lender has been employed for at least a year, and will ask to see three months of salary slips, or six months of bank statements if you are self-employed.

Sooner rather than later

Property is a fixed asset that can grow substantially in value, so it can provide an important foundation for financial security in future. So, while the thought of a 20-year financial commitment might seem overwhelming to many young adults, especially if you have just achieved financial independence, there are many good reasons to get on the property ladder sooner rather than later.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

South African banks have loosened their lending criteria which has supported a revival in the property market and helped new buyers enter the market.
“For the last few months banks have continued to relax their lending policies, which is positive news for potential home buyers and the property market as a whole,” 

Banks, across the board, have relaxed their loan-to-value (LTV) requirements. This is a strong signal that the banks’ appetite to lend has changed for the good, and that the banks’ view is now for the recovery of the property market and of house prices.

Three of the four big banks are now offering 100% loans with one of them offering 95% that has opened the financing taps for homebuyers.

“This means that banks will approve the full value of the property without requiring large deposits which became the norm since last July,” . “It is also positive for home owners who have been trying to sell as improved affordability of potential buyers, boosted by improved access to credit, will support a recovery in the property market.”

The latest data shows that the average deposit required is far more affordable at 12.5%. This is a significant improvement since July this year where deposits required were up to a high of 24.2%. The decrease in deposits over the last few months will reduce the barriers to entry for purchasing a property.

“Those who tried to apply for loans earlier this year and were rejected because they didn’t have the required deposit should try again,” . “With the relaxation of lending policies there should be a much higher chance now of being approved for a loan on favourable terms.”

Another positive trend for consumers is that banks have become more competitive on interest rate concessions. For the first time since early 2008 banks with generally more relaxed credit criteria are losing out to banks with better rate concessions.

“More competition amongst banks for non-bank customers means that potential home buyers who have not been approved for a loan by one bank, are likely to have success with another bank,” . 

We have seen a 21% surge in approved bonds from August to September and expects a further 18% increase for October. If the 18% increase in October is achieved, The market will have experienced an 84% growth in the value of approved loans since April this year.

We recommend that consumers looking for the best deal on home loans should make use of a mortgage originator.

“Originators have the ability to speedily shop around for the best deal and offer independent advice, all at no cost or obligation,”

To apply for your Home Loan please go to www.mortgagepluscc.co.za for more info or call Us on (011)327-4489.