Deposits still key for prospective Owners in bond application process

Although 100% home loans are being approved by banks in select cases, potential property owners are advised to save for mortgage deposits, due to the numerous economic benefits for prospective home owners in the long-term.

This is according to Morne Prinsloo, one of South Africa’s leading bond originators, who says that on average 36.5% of applications for 100% bonds were granted by the banks during March 2011. “This is in comparison to the 48.33% of bonds that were granted with a 10 – 20% deposit during the same period.”

Prinsloo says that deposits offer both long and short-term benefits for potential home buyers. “Although the current property cycle is seen as a buyer’s market with many good investment opportunities for potential home owners, the current economic climate has caused financial institutions to be risk averse with stringent credit criteria and lending policies. It is therefore more difficult for consumers to lending policies in this environment.”

He says that banks often look favourably at buyers with a deposit and will be more open to negotiate a competitive interest rate on a home loan, as a result of the reduced risk to the bank. “Besides improving your chances of getting your home loan approved, a bigger deposit could result in a more favourable bond rate that will save you in interest over the term of the loan. As a home loan is paid back over a long period, generally between 20 and 25 years, even a small deduction in the interest rate on your bond, can save you thousands of Rands in interest payments over time.”

He says that having a deposit available will also improve the buyer’s chance of securing the purchase and speeding the transaction up. “Properties on the market are currently taking longer to sell. A deposit will strengthen the buyer’s negotiating power with the seller because of the improved chance of securing finance.

“Some sellers are also more willing to accept an offer if the buyer has a deposit, as there is a higher likelihood that they will complete the sale.”

He says that consumers looking to purchase property in the future should be saving towards deposits by putting a certain amount away each month. “First time buyers are encouraged to start saving for a deposit as early in their working careers as possible. As time goes by, interest will accumulate and assist towards securing home loan finance. It is recommended that applicants should try and secure at least a 10% deposit towards the purchase of a property, but banks will however look at any deposit from 5% up as favourable.”

Prinsloo says that consumers that don’t have cash or immediate access to funds can investigate alternative sources such as personal loans or deposit guarantees – an insurance policy specifically designed to assist potential home buyers to secure a deposit.

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

Personal Loan option – Home starter

This Personal Loan product is specifically structures for Property Buyers that wants to buy residential properties but do not have a cash deposit or transfer cost for the property they are buying.

Please Note: This Product is exclusively available to clients that apply for a new home loan through Mortgage Plus.

Documentation requirements:

• Homestarter application form from Mortgage Plus – Fully completed and signed by the Client and an amount up to R75 000 must be specified.
• Bond application form Mortgage Plus
• Copy of Bond Grant Quotation- This must be a formal grant by the financial institution. No offers will be accepted for it is not a definite approval.
• ID – South African 13 digit bar coded ID
• Payslip – Last payslip and may not have more than 2 garnishee orders. If a Client receives a basic plus commission / regular overtime / variable allowances, last 3 months payslips are needed; if earning commission only last 6 months payslips; if paid weekly full months history of payslips.
• Bank Statement – 1 full month statement which cannot be older than 7 days is required and must displaythe latest salary being electronically credited, opened for at least 2 months, be in the Client’s name and have no more than 2 unpaid items displayed. If a Client receives a basic plus commission/regular overtime/variable allowances, then a full 3 months is required and for Clients earning commission only a full 6 months is needed. We would suggest that the bank stamp validating the statements not be older than 4 calendar days so it gives sufficient time with Credit before becoming outdated.

Interest rate:

• The interest rate you pay on your Loan is not fixed and will be affected by fluctuations in the prime rate.
• Interest payable is calculated on your daily outstanding balance but charged to your account once a month.
• The interest rate will vary based on your credit risk, term of loan and prime interest rates.

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