Home buying tips and Mortgage information

When it comes to buying property and applying for a bond, knowledge is power. Buying a home is a serious financial commitment, and certainly not one you should rush into blindly. Do your homework properly; speak to an authorised financial service provider such as your banker or broker, but also get to grips with home loan terminology by reading our bond terms glossary.

Property: to rent or to buy?
Knowing when to buy property depends very much on your personal circumstances. If you’re in a transitory part of your life like starting a new job, getting married or considering moving or emigrating it may not be the best time to be making big financial decisions.

Buying a property and repaying a bond  is no short-term commitment, and it’s generally a good idea only to buy once you’re fairly settled and financially secure. Yes, now is the best time to get into the property market, but certainly not if your income is going to be erratic for the next year, or if there is any reasonable chance that you’re going to be experiencing cash flow problems. Reduce your own financial risk exposure then only consider buying a property when you’re in a good position to do so.

Sure, renting from a landlord means paying off his or her asset, but it also limits your own financial commitments, and will ensure that your accommodation-related expenses remain constant for the duration of your lease agreement.

Know what you can afford
When it comes to buying a property, how much you can afford is influenced by a range of factors like your total income, total expenses, the nature of your income-generating activities as well the medium term economic prospects all play a role. Some property investors may argue that buying a bigger (more expensive) property will increase one’s potential return on investment, yet there are no guarantees that this strategy is fool-proof.

Even if you are able to get a “bigger” bond approved in accordance with the National Credit Act, unexpected interest rate increases could still increase your monthly bond premiums to the extent that you can’t keep up with the repayment schedule and then what? Not spending the maximum bond amount you can qualify for is not a bad idea inasmuch as it “builds in some fat” and protects you against economic factors beyond your control.

Buying a cheaper property thus means that you are not as vulnerable to interest rate hikes as you would be if you’d gone for the biggest bond possible.

When you’re using a bond calculator, be sure to take ALL your regular monthly expenses into account, and also allow for those unexpected expenses like medical and dental expenses, speeding fines, annual tuition fees, property related levies, birthday presents and holidays don’t pay themselves!

Buy property for now – and later!
Although you may wish to get into the property market as soon as possible, you would do well to consider what your property-related needs will be in five years’ time. Will you still be single and living on your own, or will you be living with someone else? Will you be starting a home business, or a family? Will your home’s locations still be suitable in terms of where you’ll work, and will the boho neighbourhood you enjoy so much be suitable for raising children in?

Buy the right property in the right location
When it comes to buying the right property, location is key and not only in terms of suiting your lifestyle requirements, but also to ensuring that your investment grows (“appreciates”) over time.

Prepare yourself for the long haul with a bond
Property is a not very liquid investment category. Be prepared that you will probably need to hold onto your home – and bond – for several years before you could sell it and make a profit. Given the cooling property market, chances are that you could end up making a loss on your home if you need to sell it after only a year! It is therefore critical that you’re in the right stage of your life, and that you truly can afford what you buy.

Choose your co-investors carefully
Buying with friends or family members can help you get into the property market earlier – yet it could also leave you stuck with having to foot their bond contribution if things go sour. Should you choose to co-invest in a property, it is probably a good idea to consider getting an “income protector” or similar type of bond cover or life assurance cover policy for all the parties investing in the property.

All the parties should also consider their own medium-term property needs like what if you and your mates all got hitched with live-in partners? Would everyone be happy with running your home as an adult commune? If not, will you all be able to formally agree to how the arrangement is to be managed?

Choose your bond type carefully
Choosing the right type of bond for you will again largely be influenced by your own circumstances, property-related needs and financial position. Be sure to discuss these at length with your bond originator or authorised financial services provider, and get as much bond information as you can. It’s one of the most crucial financial choices you’ll need to make, as it has long-term financial implications.

South African bond companies tend to offer a range of bond solutions ranging from interest rated linked home loans and fixed-rate bonds to variable-rate mortgages and second mortgages. Understanding the difference between these types of home loans is key, as it will enable you to choose the right type of home loan to suit your needs.

Always read the fine print
Applying for a bond tends to involve a fair amount of paperwork like always read carefully before you sign anything, and be sure to ask for more bond information if you’re not sure what a particular contractual clause means. Make sure that you know exactly what your contractual obligations are, and have your bond originators explain how different case scenarios would affect you financially.

Establish your fixed expenses and budget accordingly
Buying a house comes with a range of additional expenses. Property levies, property taxes, maintenance and bond cover all add up, so be sure to consider and list all your expenses (and potential expenses) before you apply for a bond and commit to buying a property.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

A Bond Originator Works As A Mortgage Negotiator Between You And The Bank

Everyone dreams of buying a home and typically will save for a while in order to secure a down payment. Traditionally once you are ready to purchase your first home you will approach a financial institution for a mortgage. Then you would wait to hear if you have been approved for a mortgage. Things are not necessarily that easy anymore, banks are becoming more difficult to secure a loan from and there are many different banks offering various mortgages rates. The whole process can be confusing; this is why a Bond originator can be helpful.

Bond originators provide a service to you in applying for a mortgage. It is their job to assist you with the process of securing a home loan and get you the best possible rate. A Bond originator actually simplifies the process by acting as the liaison between you and the financial institutions.

Agencies that act as Bond originator’s work for you but get paid by the bank. Their services are free to you the applicant and you never pay them any money. The way they get paid is through the bank when a bond for a new home has been granted.

The originator works directly with you, the applicant, and handles all the leg work associated with securing a bond. These professionals deal with financial institutions on a regular basis. They are educated in all the options that may be available to you the loan applicant.

Since they deal with the banks on a regular basis they have the power of the negotiator and therefore provide you with leverage that you as an individual would not have. Consequently the banks are more willing to work with them since they represent more than just your mortgage. They basically have the advantage of being more than just a single person dealing with the bank.

This leverage can be utilized to provide you with a loan that has a better rate and perhaps shorter-term than you would have qualified had you not used their service. Utilizing an originator to secure your mortgage is a hassle free way of securing a loan and assuring yourself that the terms are the best possible. These professionals can evaluate your financial situation and determine what you may qualify for and what they feel they can pitch to the bank.

Bond originators are becoming the most popular method of applying for a loan for a new home. It is believed that this will eventually be the only way to apply for a mortgage. Under tough economic conditions banks become more and more selective and provide mortgages only to the absolute best applicants. This does not mean that a home loan is out of reach of the average person. But rather that the bank needs more evidence of your ability to pay. The bank originator will convince the bank that you are a viable candidate for a mortgage. If they don’t secure your mortgage they don’t get paid. These are the reasons why you should seriously consider using a Bond originator when you get ready to buy a new home.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Buying Your First Home: Everything You Need to Know Before Taking the Leap

Buying your first home can be a daunting experience; with all the hype in the news about high interest rates, repossessed homes, and the near impossibility of obtaining a home loan most people are running, sprinting, towards renting a home instead of running the risks of buying one.

But even with all the negative press about the current state of the property market there is no better feeling than owning your own home. And with interest rates about to drop there is no time like the present to take the plunge. Here is everything you need to know before buying your first home …

Be Pre-approved:Nothing beats the piece-of-mind of shopping with a pre-approved bond. Arranging a pre-approved bond will minimise stress when shopping for your new home; knowing what you can afford will allow you to narrow down the search and save you the time of looking at things you can’t afford and that aren’t suitable. www.mortgagepluscc.co.za

Plan Ahead for Success:

 Before setting out to buy a home, it pays to think about your needs. Often one may fall in love with “the perfect house” only to find that the home is not in the right area or that the garden is too big to manage. If the home is for a family, the needs of the whole family must be considered – husband, wife, children, and sometimes even grandparents. Think about how many bedrooms and what size kitchen is needed; and whether having a garage is important. Do you have a dog and need the property to be fully fenced?

Very few people have the money to buy exactly what they want, so make a list of your requirements and break it down into “must have” and “like to have”. It will help you when you start looking at homes. Then think about the area where you want to live – is it quick and easy to get to work? Are there schools and shops nearby?

Monthly expenses need to be carefully budgeted before you even start looking. Owning a home not only means paying a monthly bond installment but has many new bills too. Make a list of everything you’ll have to pay – bond instalment, rates or levies, house insurance, mortgage (bond) protection insurance, electricity and water, repairs and maintenance; and make sure your budget can afford everything you have listed.

Know your Agents:

Get to know the agents in the areas you are searching in and inform them about what you are looking for and your price range. They will be able to notify you when new properties come on the market and can provide a tailor-made service to suit your needs.
Putting in an Offer to Purchase

Once you have seen a property you like, the estate agent will help you draw up an “Offer to Purchase”. This document contains all the terms and conditions of the sale, the purchase price, the payment terms, the date you will take occupation of the property, and the occupational rent.

Occupational rent is a monthly amount paid to the seller by the purchaser to occupy the property prior to the date of registration of transfer of the property into the name of the purchaser. Alternatively occupational rent could be paid by the seller to the purchaser if he/she needs to continue occupying the property for a period after registration of transfer.

If you plan to take out a home loan, the “Offer to Purchase” must include a condition that the sale is subject to bond approval being obtained within a realistic amount of time — i.e. 7 – 10 working days. Once you have confirmation that your loan has been approved, you must notify the estate agent immediately to ensure that your offer becomes unconditional and to enable the process to continue.

This condition is very important, because if you are not able to secure finance, the “Offer to Purchase” will terminate and become null in void, and neither you nor the buyer will be liable to pay any costs or penalties.

The Offer to Purchase should also include details of any unusual fixtures or fittings which are included in the purchase price, or which the seller might want to take with him when he leaves. Generally all items which are “fixed” remain in the house, but furniture, loose carpets and appliances go with the seller. This is where conflicts often arise, so it’s best to ensure any important items are noted in the contract.

Take the time to find out everything you need to know about a property before signing anything. Visit the house for a second look – you may have missed something the first time. Always express your concerns to the estate agent and ask them to assist you in clarifying any problem areas that you may have or consult an Attorney. Once the seller has accepted and signed the offer, it becomes a contract binding on both parties. However, if the purchase price is R250 000 or less, the buyer has the right to cancel the offer within 5 days of signing the Offer to Purchase. This must be confirmed by the buyer giving written notice to the seller and the sellers’ agent within those 5 days.

Applying for a loan:

As a first time home buyer there are a number of special criteria which you’ll need to fulfill in order to qualify for a home loan.
One of the most important factors to consider is what size bond you can qualify for; often this is about 25-30 percent of your salary, however if you and your partner apply for the loan jointly you may be approved for a larger loan amount.

Upon the application for your home loan the bank will consider the Loan-to-Value ratio (LTV) , which is the ratio between the home loan amount you are applying for and the value of your property. This is an important factor as the LTV percentage forms part of the interest rate calculation on your loan amount.

The maximum loan term offered by all banks is twenty years, and some banks require a life policy to be ceded to them. It is important to clarify this with your bank immediately.

 The general requirements of applying for your first home loan are the basic details of your monthly salary, your credit history and the offer to purchase.

The following criteria will need to be passed to qualify for a home loan;

- You must be 21 years or older
- Proof of six months of permanent employment or at least two years of self-employment,
- Minimum salary requirements can vary between R8 000 and R10 000 per month joint or single income.
- You’ll need to have a credit clear history – i.e. no judgments or defaults.
- Some banks may require SA citizenship.

Also Make sure you have all the following documents available.

- Copy of ID
- 3 months bank statements.
- Offer to purchase, which is the written agreement between the seller and the buyer on the purchase price of the property. Sectional Titles must submit most recent body corporation financials.
- Most recent pay slip, commission earners will need to submit 6months pay slips.

- If you’re a self employed business owner:
- 6 months business accounts statements
- 6 months personal bank statements
- a letter from auditor or accountant stating monthly income.

Taking Ownership of Your New Home:

Once all the conditions of the contract have been met and the deposit paid, the next process is the transfer of the property into your name and the registration of the Mortgage Bond at the Deeds Office. The Conveyancing Attorneys handle this part of the loan process and will contact you when the documents are ready to be signed.

The seller will also have to provide you with an Electrical Clearance Certificate, as well as a document stating that the property is pest-free. These conditions may vary depending on which province your property is situated in.

The registration and transfer process normally takes between 8-10 weeks if there are no unexpected delays.

The day the transfer is registered in the Deeds Office is the day you become the legal owner of the property. Your lender will start the insurance policy and begin charging interest on the loan and will inform you when the first instalment becomes payable. From this date onwards you are also responsible for paying rates and levies — or earlier, depending on conditions of sale agreement.

Once everything is finalised:Once all the Is are doted and the Ts crossed you can finally enjoy your home. Transform your new house into a home by personalising your space. Focus on making your home a comfortable space where you can unwind and have fun; after all you will be sacrificing a large portion of your income to stay there.

And don’t forget to think long-term; boost your future re-sale value by ensuring that you keep your home updated and looking good. Budgeting for routine maintenance and unforeseen emergencies will ensure your home stays looking as, if not more, beautiful than when you bought it.

Words by: Crystal Espin

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za