Information on how to apply for bond finance to help purchase a home has been disseminated by SA’s banks and bond originators in a steady stream for some years.

Yet says Rob Lawrence, he and his team find themselves daily dealing with false assumptions which often reveal a deep-rooted ignorance as to the rules of property purchasing and how to finance these transactions.

Lawrence is now in the process of distributing a short memorandum on this subject to Rawson Properties’ 146 franchisees countrywide. He says this should “help scotch some wrong ideas” on the part of aspirant home buyers and avoid wasting unnecessary time in the home loan application process.

Entitled “Six common misconceptions about home purchase finance”, Lawrence’s memo lists the following as beliefs that most commonly lead to problems:

1. Minor or not too serious credit defaults in one’s past will either go undetected by the banks or will be overlooked.

“There is a perception that, for example, a missed instalment or two on household appliances or a car is no great issue. However, every credit payment failure is a black mark on the applicant’s record and the chances are high that it will have been recorded.

To get a big percentage bond, you have to have a completely clean record,” says Lawrence. A bank might still make an offer to such a client, but it certainly will not be above 90%.

2. Those able to get a loan at 2% below prime previously will be able to do so again.

This misconception crops up regularly with those who bought in the boom times prior to 2007 and probably did get a very favourable rate then, says Lawrence.

He says today the banks are pricing for risk (as they perceive it in the client’s position) and for increased profits. In practice this means that, even with “good” clients, bonds are typically awarded at the standard rate or often above it, i.e. 9.5 or 10%. Those who now get even 1% below prime, says Lawrence, are the fortunate low-risk few.

3. The applicant’s own banks will give them the best deal.

Lawrence says regrettably every bank has different lending policies and different views of risk. “Every loan is treated on its own merits and, as the banks’ lending criteria are all different, the borrower will quite possibly get a better deal from a bank he has never dealt with before.”

4. A bank valuation on the property means that the bank has given it a “clean bill of health” and it is in an acceptable condition.

This is not the case, he says. The bank valuer’s task is simply to assess the market value of the home at the time it is bought.

5. Home buying and getting bond finance are not for the poor.

Lawrence says this is definitely not the case. SA’s banks he says have committed themselves to the affordable (R350 000 to R500 000) market and, if anything, are inclined to be a little more lenient in their rulings here than on the more expensive properties.

“The goal is to make South Africa a property owning nation, and the latest figures from FNB do show a big rise in first-time home buyers, who now comprise 23% of the total.”

6. The bond applicant working overseas and earning a big salary will be considered a good loan risk.

Again, says Lawrence, this is not true – the banks have seen too many cases in which, on returning to SA, the high wage earner has had to settle for a substantially lower salary which in turn, has made it difficult for him to service a big bond perhaps granted on the higher income he was earning overseas. The banks therefore tend to limit overseas applicants’ bonds to between 50% and 70% of the purchase price, he adds.

Is there a general rule of bond financing illustrated by these common errors?

According to Lawrence the rule is that those who persevere win in the end.

“It may take time, but if the applicant works at qualifying for a bond, he will often do so in the end, even if he has to lower his sights in the process.”

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

Originators vital to speed up housing delivery

Housing developers will be hard-pushed to meet the huge pent-up demand for affordable homes – and create thousands of jobs in the process – without the help of mortgage originators.

So says Rudi Botha, who notes: “All eyes are currently on the so-called gap market, which is individuals or households earning between R9000 and R16 000 a month who can afford homes costing about R600 000 and less.

“And with the transfer duty threshold having recently been adjusted to exempt such homes from transfer tax and the government on the verge of introducing a mortgage indemnity fund to stimulate bank lending to this type of buyer, it should be all-systems-go to start eliminating the housing backlog.”

The trouble is, he says, that there just aren’t enough homes to meet the demand in this sector of the market, which is also being fuelled by low interest rates – “and that developers are unlikely to be able to get on and provide them without the help of originators to speed up homebuyers’ access to finance“.

Botha notes that the success of a new development generally hinges on how fast the new homes can be sold and transferred – which in turn requires that lots of “end users” or homebuyers have quick access to home loans at competitive interest rates.

“Which is where the help of originators – at no cost to the developer – becomes invaluable. In the first place, we provide major assistance in the administration of home loan applications. Our experience is that the rate of conversion in this sector is pretty low, and that there is a lot of wastage unless applicants are pre-screened. So we do all the credit and affordability checking before applications are made, and we also manage all the supporting documentation for each application.

“In addition, we can make multiple applications using a single document, which further streamlines the application process and improves the chances of each applicant being granted a loan.”

What is more, he says, there are other big benefits for consumers in having an originator on hand when buying in a new development. These include the provision of information about the “hidden” costs of buying a home and the home loan repayment process, impartial advice on the most appropriate home financing options, and assistance to obtain the most competitive interest rate possible – all at no charge to the consumer.

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