Hidden Costs in a Mortgage

Most every loan is going to have associated with it fees for insurance, valuation, etc. Most of these fees are commonly required amongst all lenders and they must give you a list of their costs associated with a mortgage. Despite the fact that the costs are disclosed, some lenders may include extraordinary “junk” fees in their costs that an unwary buyer may not recognize as an extra fee. At the time of a loan application lenders are required to give you a written closing cost estimate.

First, determine if you’re rate are being loaded. Some lenders advertise artificially low rates to attract customers but load up on fees to compensate for a lower rate. A tip off to a lender that charges hidden fees would be a lender who advertises interest rates that are appreciably lower than the competition. Interest rates are very competitive and shopping for the very best rate may in fact work to your disadvantage. Differences in rates of 1/8^th or 1/4^th of a percent result in very little difference in a payment and may be offset by poor service and added hidden fees.

Mortgage companies and fees. Mortgage companies often advertise that through their intervention the financial institution will subsidize the client’s bond registration fees. But, at what cost to the client? Saving R2 000 for example in bond registration fees, but ending up paying R200 000 more in interest is a great deal for the bank, but not for the client.

Mortgage companies are often owned by a bank or an estate agency. The real issue is a serious lack of independence and conflict of interest. Clients have no guarantee that their mortgage application will be channeled to the lender that offers the best interest rate instead of to the one offering the broker the highest commission. These fees will be subsidized by the banks customers in the form of higher charges and higher interest rates.

Always work with an mortgage firm that is independent from any bank and who’s services are FREE and without any premiums attached to the client like Mortgage Plus.

Correcting Past Credit Problems

Contrary to what you may have heard, credit reports are for the most part accurate. Common last names and a “Jnr.” in the family does cause a few problems but credit reports identify people by their identity number, address, and name. If you have an issue with your credit report, credit-reporting agencies are required to attempt to resolve the problem. Most of the information has to be provided by the individual and they should stay in touch for as long as it takes, frustrating or not. There are two main credit repositories in South Africa: Trans Union, and Experian. These companies each hold a database of information and provide it to a more local credit-reporting agency that may actually be issuing the report. If you have a dispute, you can go direct to the two repositories to attempt to clear the issue.

As mentioned before, credit scores in the 500 range can cause problems when attempting to obtain new credit. You can raise your score if the original information was incorrect, or you can over time improve your payment history, but it may take a few years of diligent payments to appreciably raise your credit score.

If worse comes to worse declaring bankruptcy  may be your only answer, but despite its growing popularity, I recommend it only as a very last resort. A bankruptcy will stay on your record for years and make obtaining credit difficult. There are two methods to declare bankruptcy: Voluntary and Compulsory Insolvency (bankruptcy). If your creditors have you sequestrated, this is known as compulsory sequestration. If, however, you decide to have yourself declared insolvent, such act is referred to as voluntary sequestration.

Should you not have yourself declared insolvent, but wait for your creditors to take the necessary action, there is a possibility that they will not succeed in their application for a court order. It may no longer be in their interest, on account of the fact that your assets are worth too little to them.

In the absence of compulsory sequestration, your debt simply increases further (as a result of interest), and your financial suffering is aggravated and endures for longer. The descriptions above are overly simple and general, but the bankruptcy option is a poor one and you should explore your options with an attorney before making a decision. After a period of time a rehabilitated insolvent may apply for credit, but this will depend on numerous factors. Most lenders state that at least a year must pass after a person’s been rehabilitated and a new good credit history must be established. A difficult chore, but it can be done. Make sure that rent or mortgage payments have no late payments for at least the previous 12 months. Avoid paying in cash; make all payments by check or credit card where your payment history can later be verified. It will also help to explain to your lender that the situation that originally caused the problem, a job loss, illness, etc., has now been resolved.

To learn more or if you’re interested in getting a loan, or are worried about debt, make an enquiry with Mortgage Plus at www.mortgagepluscc.co.za or call (011)327-4489 / morne@mortgagepluscc.co.za

With banks beginning to relax their lending policies supporting a revival in the property market now is the time to apply for a bond.

“With the relaxation of lending policies there should be a much improved chance of being approved for a loan on favourable terms. “Banks are once again offering 100% loans and the current lower interest rates make it a better time for consumers looking to buy.”

Getting that bond approval.

Checking affordability

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. Our Mortgage Plus 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 upfront, and add a sizeable amount to the cost.”

Get prequalified

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. An additional positive factor is that buyers who are prequalified are in a much stronger position to negotiate with sellers.

Check your credit record

Bond applications may be declined for several reasons: you may not be able to afford the monthly loan repayments, or may require a 100% loan that would push the repayments beyond your reach. Another critical consideration is your credit profile.

“This includes your employment history and consumer bureaux 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. Mortgage Plus also often motivates the merits of a particular loan application to the bank’s credit manager.”

To improve your credit record you can start cancelling out-of-date credit cards; and ensure that you pay all instalments on existing debt by the due date every month.

Submit the correct information

To assist the bank in determining its risk, you will be required 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.

If you go through an originator, such as Mortgage Plus, they will ensure you have all the correct paper work to avoid unnecessary delays.

Get the best interest rate

The lower the bank’s risk in lending funds to a particular borrower, the better the rate it will offer that individual. In calculating its risk, it will consider factors such as the amount of equity you are willing to invest into the property, i.e. your deposit; the size of the loan; and the repayment-to-income ratio (the ratio between the bond payment and the buyers income).

The type of bond you apply for, your credit history and the investment value of the property you intend buying also affect the rate you will be offered. Shop around and negotiate with various banks to ensure you get the best package. A convenient way to do this is through the services of a mortgage originator who facilitate it all on your behalf as a free service.”

“While a deposit is not always required, try to put down 20% or more if you can, as the bank is more likely to offer you a better rate as the risk of the loan is reduced,”.

Use a mortgage originator

Finally, we suggests that consumers looking for the best deal on home loans should make use of a mortgage originator.www.mortgagepluscc.co.za

Mortgage originators specialise in shopping around between banks and negotiating the best deal for the customer for free.

“Obtaining a preferential rate of just 0,1% below the prime rate can make a big difference to your monthly repayments. However, in negotiating the best package, the mortgage originator needs to take more than just the rate into account and will structure a package that best suits the individuals needs overall.

“With the property market beginning to perk up and banks loosening lending criteria as well as granting 100% loans, now is the best time in the last two years to apply for a bond.

To Apply For Your Bond Please Go To www.mortgagepluscc.co.za or call us on (011)327-4489