Personal loans are not the only solution to securing funding for housing alterations or high-ticket items like weddings, motor vehicles and school fees. Bonds, as well as the latent value in your home derived from capital appreciation since the property was acquired, offer a cheaper alternative.

Before deciding the financial goals, you need to access your financial position and plan accurately for managing the debt repayments particularly in the current economic climate where the banks have assumed a harder line in risk assessment.

In the fourth quarter of last year South African banks tightened their credit lending criteria that now place restrictions on accessing capital in home loan accounts. This is in line with the National Credit Act that governs consumers’ credit facility to prevent over-indebtedness.

However, that does not detract from the reality that the bond – whether it is an existing bond or the registration of a second bond over a property – remains one of the cheapest vehicles through which to borrow money.

The amendments have seen the banks freeze clients’ access to draw down additional cash from their home loans in a bid to manage their risk. This means particularly high-risk clients have to apply to access funds including repaid capital and equity that has been accumulated over the years.

The application includes an affordability assessment to gauge individual client’s ability to repay the loan after the funds have been withdrawn.

Having passed that hurdle and qualified to access the capital, the bond offers the opportunity for renovating your home, consolidating debt or paying off high-ticket items like motor vehicles, holidays, school fees or a wedding.

The benefit is that accessing the existing bond or securing a further loan over the property that takes advantage of appreciation since the initial purchase date provides the opportunity to repay debt at the prevailing prime rate. In some cases, Mortgage Plus may secure mortgages at a discount to prime, further reducing the costs of capital.

Essentially the bond has worked as a savings mechanism for additional capital that although does not earn interest, effectively saves future interest generated over the bond. By reducing the terms of payment (to say 15 years rather than 20), you have negated interest payments over a five-year period and the benefit of that saving is not taxable.

However, even the bond option comes with the opportunity to think out of the box. Essentially paying cash for an item – even large-ticket ones – is the best means for limiting debt traps and by using the bond as a savings account until the full purchase price has been achieved, you scoop a double bonus by avoiding debt and benefiting in the short-term by having additional capital in the bond to lower the interest payments.

Consolidating assets may be another alternative to personal loans. In brutally analysing assets around the house – two motor vehicles when one may be sufficient or leisure craft that have spent more time in the garage than on the water – the bulk of the required expenditure may be within reach without stress.

Mortgage Plus ranks among the country’s largest mortgage originators and, via a national sales and branch network, can offer free advice to home owners and buyers.

A relatively young business locally, bond origination is the process of finding mortgages for home owners that suit their specific needs. The key lies in giving the client a choice of banks and thus providing a hassle-free service without incurring additional costs.

Essentially, each bank has its own lending criteria and product range to different market segments – from first-time buyers to the private bank client with the multi-million-rand property. Also, Mortgage Plus sells home related finance products which add value such as life cover on a bond, home owners’ comprehensive insurance and bridging finance to cover the time gap between buying one property and selling another.

By choosing Mortgage Plus for a loan, you will get that continual service to make sure you are getting the best deal possible.

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

Lenders will take the following into account with every mortgage application.

INCOME

When applying for a mortgage, lenders will look at your total income before any deductions (gross income) to access if you would be able to afford the mortgage payments. Lenders will consider the following as income:

-Salaries & Wages
-Regular Incentives
-Investment Income
-Retirement Income
-Regular Commissions
-Rental Income

CREDIT HISTORY

To qualify for a mortgage it is vital that you a satisfactory record of paying all your accounts on time. This can affect your credit score substantially. A credit score is a summary of a number of positive and negative factors, such as the information on your credit report that aims to predict how likely you are to honor your credit commitments in future. This rating is often used by lenders to identify the risk in offering you credit.

If you experienced problems in the past, and if you have a good explanation it can be taken into account. Make use of an experienced mortgage broker to assist you when applying for a mortgage.

TOTAL DEBT

The amount of debt you have will play a significant role in qualifying for a mortgage. Most South Africans have debt in the form credit cards, store cards, personal loans etc. As a rule of thumb lenders require that the total off all your monthly debt payments may not exceed 80%-85% (depending on the lender) of your nett income.

MORTGAGE QUALIFICATION CRITERIA

Before the introduction of the New Credit Act (NCA) lenders used the 30% rule as qualifying criteria. Now, after implementation on 1 June 2007, you have to qualify on affordability. In other words, they will look at your NETT salary, and deduct all your monthly expenses to ensure you can still afford this amount.

If you already own property and would like to apply for additional finance on your home loan, the same rule applies. One advantage, though, is if you will be consolidating debt, because some banks will take into account the debt you will be settling and looking at your improved cash flow when calculating your affordability.

PROPERTY VALUATION

Your lender will do a valuation on the home to determine its value, before granting a mortgage.

The value of the property must be in line with the purchase price. If this is not the case, the bank may approve a lower bond amount.

If you’re already own property and would like to apply for additional finance on your home loan, you need to have sufficient equity in the property to qualify. Equity is calculated by taking the market value of the property and deducting what you owe. This difference is the equity. In certain suburbs the banks will allow you to apply up to the full value of the property.

To apply for a loan you will have to fill out a short application form. You will then receive a FREE quote from well established, nationally recognized lenders. You do not need to decide now whether the loan is for you.

Just apply and compare the repayments to your current situation. There is no obligation on your part. If you decide that it is not for you, you simply do not have to accept the offer. You have nothing to lose and everything to gain.

Click Here – to get your free Quote!