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A surprising number of home loans are being approved at 100 percent of the property price, according to the latest statistics from mortgage originator – Mortgage Plus Bond Originators, but this does not necessarily reveal a slackening of credit qualification criteria on the part of lenders.

These figures show that although most home loan applicants are still required to have a deposit of between 10 percent and 40 percent, depending on the type of property they want to buy, almost one in every five (18 percent) of the loan applications processed by Mortgage Plus Bond Originators is now being approved for a 100 percent loan.

In addition to this, says Mortgage Plus Bond Originators, 13.5 percent of applicants are obtaining loans for up to 104 percent of the property’s value through the special first-time buyers’ packages being offered by some banks on affordable houses.

“This means that more people can get a foothold on the property market ladder at a time when interest rates and prices are low. In the case of first- time buyers, the loans sometimes even include transfer and bond registration costs that would otherwise have to be paid in cash.

“And we should not forget that many people who are buying through the banks’ assisted sales programmes for financially distressed homeowners are also able to access 100 percent bonds as well as a 50 percent reduction in transfer costs.”

However, he says, what is most significant about the increase in the number of 100 percent loans is that it indicates an increase in the number of potential borrowers with sound credit records.

“The banks are not reluctant to grant 100 percent bonds, but they do have to impose strict conditions and follow stringent guidelines in terms of the National Credit Act. The fact that more homebuyers are able to access 100 percent finance is a good indication that the financial position of households is steadily improving as people pay down their debts and get their finances under control.”

Mortgage Plus does caution, though, that there are seldom any rate concessions on 100 percent loans, whereas borrowers who are able to pay a deposit of 10 percent or more may well be able to negotiate lower interest rates, especially if they have good credit histories and apply through an originator.

“There are also other advantages to paying a deposit, including interest rate savings over the life of the loan and protection against interest rate increases and negative equity, so overall we do believe it is a better course of action for potential buyers to save for deposits before buying.”

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

Buyers snap up distressed homes

Gauteng, the country’s most desired province has the most active distressed residential property market, according to RE/MAX of Southern Africa.

The agency says of the 600 distressed properties listed to date this year, 70 percent are in Gauteng, 20 percent in KwaZulu-Natal and 10 percent in the Western Cape.

Distressed properties are expected to continue flooding the South African residential market for the next five years at least, says Peter Gilmour.

He explains that a lot of this is caused by interest rate hike on the horizon as well as the consumer’s debt-to-disposable-income ratios and the homeowner’s ability to meet their monthly bond repayments.

“Of the distressed properties listed in Gauteng, close on 40 percent have been successfully sold.”

He explains that these distressed properties spent an average of 48 days on the market and are priced between R250 000 and R2 million.

In Pretoria, two distressed properties sold this year spent a month on the market.

Grobler says distressed properties in this area range between R500 000 and R1.5 million and not all of them are in the bank’s distressed program.

“There are many homeowners who are desperate to sell their properties due to financial constraints, but are not yet on the official bank’s distressed program.”

These properties offer buyers a good investment as property remains a valuable asset class to invest into.

“They are qamna prices and we do not see distressed properties as offering anything other for a buyer in comparison with a non-distressed property,” she says.

In some parts of Gauteng, distressed properties that have been sold were sold for less than market value.

Jannie Storm,  operating in the Vaal Triangle including Vanderbijlpark, Sasolburg and Vereeniging says they have sold 11 distressed properties for less than the market value.

For the most part, says RE/MAX, distressed properties sell very close to their actual market value.

Currently, Storm has 28 distressed properties in Sasolburg and Vanderbijlpark priced between R300 000 and R600 000. They take between 30 and 70 days to sell on average.

In some parts of Gauteng, distressed property sales have created an immense demand for property in areas such as Clayville and Tembisa on the Midrand periphery.

This is largely thanks to the banks’ more lenient approach towards buyers of these distressed homes, says Julie Davison-White, principal of the Aida Midrand office.

“Banks have been granting bonds of up to 100 percent to buyers with good credit records when they buy property in these areas as well as some parts of Midrand,” says Davison-White.

However, she says this is not the norm as many buyers still have to put down deposits of at least 5 or 10 percent. Many buyers in Clayville and Tembisa have been purchasing property through the assisted sales programs offered by the banks to financially distressed homeowners.

Davison-White says through these programs, buyers are often able to access 100 percent bonds and 50 percent reduction in transfer costs enabling them to get a foothold in the market much more easily.

For distressed homeowners, she says the program assists them to sell their properties at reasonable prices instead of having them repossessed and then have their credit records tarnished as a result of repossession.

Distressed properties in this area sell quite quickly at prices ranging from R350 000 to R550 000 for free standing homes in Tembisa and from R550 000 to R700 000 for freehold homes in Clayville.

Demand has increased for lower-priced properties in popular areas such as Vorna Valley with price averages of R550 000, in Halfway Gardens, townhouses are priced at between R650 000 and R900 000 and Noordwyk, houses are priced below R1million and these are said to be selling like hotcakes.

As for freehold homes in higher price brackets, Halfway Gardens is currently one of the most popular areas for buyers targeting suburban homes priced between R1.1million  and R2.2 million  and clusters costing between R1.4 million and R2.5 million she says. – Denise Mhlanga

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