Making your Home Loan work for you

A home is a serious investment and, like all investments, it needs to be managed properly in order to ensure that you get the best possible return. But few people, once they’ve had their home loan registered and start repaying the loan, give their most important investment another moments thought. Yet there are a number of important steps that a homeowner can take to ensure that their hard-earned money is being put to good use:

Increase your home loan repayment:

When you borrow money “Home Loan” to purchase a home you are in effect taking out two loans. The first loan is to repay the capital amount (known as the principal sum) and the second loan is to repay the interest charged over the period of the loan. The majority of the money you repay in the first years of having a home loan goes towards paying back this interest, which will only marginally reduce the principal sum.

In South Africa, interest is generally calculated daily on your mortgage. In effect, this means that the amount you owe the bank increases every day. Because of the nature of compound interest, regular additional repayments made at the beginning of your loan term will have a much greater effect on the cost of your home loan than if you start paying extra cash into your home loan account five or ten years down the line. However, even if you are already a number of years into your loan term, you can still make a considerable saving by paying additional money into your home loan. By increasing your monthly instalments, you’ll reduce the term of your home loan, which means that you won’t be paying heavy home loan instalments in later years. The result is that you will have paid less money in interest over the term of the home loan.

There are a number of easy ways that you can put additional money into your home loan without really feeling the difference in your pocket:

• Put the additional income you receive from your annual salary increase into your home loan
• When interest rates decrease contact your lender “ Banks Home Loan Department” and ask them to maintain the instalment that you were paying prior to the drop on lending rates
• Put a portion of your annual bonus into your home loan, you may put extra money into your home loan anytime you want to. Every little bit helps. Making a prepayment ‘ Home Loan Deposit’ when the loan registers is particularly helpful, as you will reduce the capital amount immediately, significantly reducing the total interest payable over the term of the loan.

Use your home loan as an interest – bearing savings account:

Banks are in business to make profit so it makes sense that they charge a higher interest rate to people borrowing money from them than they do to investors who deposit funds with them. For example you might be receiving 2% interest on a positive balance for money in your savings account, but are probably being charged a much higher rate for the money you’ve borrowed to pay off your home loan.

By depositing your savings into your home loan, you are in effect receiving the interest rate that the bank charges you on your loan as positive interest on the money you invest For example, if you have a home loan for R1 million, and you deposit an extra R100 000 into your home loan, you are now no longer being charged interest on R1 million, but rather on R900 000. The money you save in interest over the time that you keep the R100 000 in your home loan is the positive interest you are in effect receiving on the money you’ve deposited. Plus you can withdraw this cash when you need it without being penalised ‘Banks Terms and Conditions Applies’

For further information contact Morne Prinsloo on 011 327 4489 or email morne@mortgagepluscc.co.za

If you would like to know more about your home loan services and mortgage requirements please phone the Mortgage Plus Head Office on:

Attached please find the Home Loan Application Form * - Short Home Loan Application Form

0861.11.11.93

info@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Mortgage pre-qualification – why it can help you close the deal

In the property game there are two ideal scenarios. The first is a serious seller who is happy to price their property competitively. The second, a serious buyer with a clear idea of what they want. In these scenarios the chances of matching buyer and seller is strong.

But what about the rest of the market? Here it takes a little bit extra, and a pre-qualified mortgage application in the hands of the potential buyer could make the difference.

Morne Prinsloo, Chief Executive Officer at Mortgage Plus Bond Originators, said it could be this reassurance, provided in the form of an endorsed certificate from a recognised mortgage originator or similar accredited financial services provider, which sways the seller or in a case where it looks like competing offers may shortly be made for the same property, he said the pre-qualified certificate could clinch the deal for the buyer.

Historically most banks were prepared to do a formal home loan pre-approval, which basically guaranteed that the finance would be made available to the buyer on request.

“The banks have moved away from the pre-approval service because it requires them to go through a complete mortgage application process with very little client loyalty when taking up the bond. Historically the pre-approval took as long as an application. This resulted in duplication and bottlenecks in approving legitimate bond applications and so the banks stopped this service,” said Prinsloo.

To aid and inform homebuyers Mortgage Plus Bond Originators introduced formal and certificated pre-qualification. This is not the absolute guarantee offered in a pre-approved scenario, but it does detail the financing options available to a potential buyer subject to them meeting the bank’s lending criteria. Mortgage Plus uses similar credit scoring models as the banks in issuing its prequalification certificates.

As a result the number of Mortgage Plus pre-qualified clients not being granted a bond when formal bank application is made, is minimal. Pre-qualification really does give both the buyer and the seller peace of mind.

For buyers there are a number of advantages. First, it introduces them to the process of applying for a mortgage. This is particularly useful for first-time homebuyers. They get a clear indication of what they will be required to show the banks on formal application, and do not feel intimidated when the formal application gets underway. Buyers also get a clear view of their budget range and can house hunt accordingly. Once they have found their house, the process of originating a mortgage for them is quicker as the bulk of the required information is already on hand.

For the seller a pre-qualified mortgage certificate indicates a serious buyer. It indicates the buyer’s ability to secure funding. The pre-qualified buyer will in all likelihood, be granted finance swiftly.

Many sellers lock themselves into a sale and then wait for the buyer’s finance to be approved. If finance is not granted, the chances are the serious buyers have moved on and the seller has to start the marketing of their property from scratch.

Mortgage Plus has invested a significant amount in the technology and infrastructure required to provide pre-qualification certificates.

“Our team can generate a certificate in no time at all, and we’d be happy to assist any buyers with the process,”

Among the clutter of speculative offers to sell, and less than serious buyers, the pre-qualified certificate sends a clear signal of intent.

That might be all it takes to clinch the deal.

For further information contact Morne Prinsloo on 011 327 4489 or email morne@mortgagepluscc.co.za

If you would like to know more about your home loan services and mortgage requirements please phone the Mortgage Plus Head Office on:

Attached please find the Home Loan Application Form * - Short Home Loan Application Form

0861.11.11.93

info@mortgagepluscc.co.za

www.mortgagepluscc.co.za