How much can I borrow for a mortgage?
One of the first question everyone asks when they are thinking of buying a property is ‘how much can I borrow?’ This is not an exact science and all banks have methods to calculate affordability. Since the introduction of the National Credit Act this has become even more complicated. The most accurate method of establishing how much you are eligible to borrow is to contact a qualified mortgage broker.

Salary Multiples
A mortgage lender will lend you money based upon what they think you can afford to repay on a monthly basis. The calculation they used to use is broadly that 30% of your gross monthly income must be your maximum monthly mortgage repayment. Therefore if you earn R20,000 per month gross then your maximum repayments should be R7,000.

Under the National Credit Act, lenders now have to base your eligibility calculations on your monthly ‘disposable income’. To calculate this you need to take your gross income, less all the deductions like tax and UIF to get your Net income. They then calculate what your total monthly expenses are; groceries, car insurance etc, and finally they subtract all you month commitments to any existing debt you have such as credit card, vehicle finance, or loan repayments. The balance (if there is one) is your maximum monthly mortgage repayment.

The banks normally add in a ‘buffer’ for interest rate rises etc, so you may actually only qualify for 85% of this figure. You then need to work backward to get the actually bond amount these monthly payments will allow you to service.

A lender will look at your bank statements and your regular outgoings to check that the expenses you have declared are in line with your outgoings on your bank account. They also have access to the Credit Bureau’s information so they can check that the liabilities that you have declared are correct. If you run a tight ship with regard to your finances, you may be able to get a bigger mortgage than you would do under the traditional salary multiple guidelines. Conversely, if you’re already ‘maxed out’ with credit cards and personal loans, you may not get offered as much.

The National Credit Act (NCA) means lenders will be tightening their credit policy so as not to fall foul of the ‘reckless lending’ as laid out in the Act. This will not only mean that lenders will start using individuals net income for their calculations, but also they will look specifically at what other borrowings the applicant may have before they make a decisions on the applicants borrowing eligibility.

For a quick check to see how much you are eligible for please go to our mortgage calculators. The various lenders do vary in how much they will lend you depending on their individuals assessment of your risk.
Other income

Other Income
Lenders will take into account other income that you may have such as rental income, investment and dividends etc. Again, lenders do vary in how they view secondary income streams. Therefore you should always speak to your Mortgage Plus consultant to assess your full range of options.

As a rule of thumb lenders will take into account 50% of your rental income on a rental property. It is up to you as the borrower to prove this income. You must be able to show money going into your bank account and lease agreements. The longer the lease, the more they will value the rental income.

You can also take into account ‘contributions’ from other family members if they are living in your property. If a partner, or child is making a contribution to the ‘family finances’ then the banks will use it. Again, the onus is on you as the borrower to prove this.

Commission earner
If you are a commission earner the banks will take this into account. However, the best way to prove this to the bank is to provide six months payslips and calculate the average commission earnt.

Annual bonuses
These can also be taken into account but you will have to prove them with entries on your bank statements and letters from your employer.

Self-employed individuals
It is harder for banks to lend to self-employed individuals because it is often harder to prove the income. The better you manage your accounts (and the more accurately) the easier it is for the banks to lend to you. Proof of your income will have to be provided in the form of Audited Financial Statements, latest management accounts and six months bank statements, as well as a letter from your accountant verifying your income.

Partners / Spouse’s income
If you are purchasing with a partner or spouse then lenders will take their income into account.

Note: Remember that banks want to lend money. That is how they make money. The banks have come under considerable pressure since the introduction of the National Credit Act not to ‘lend recklessly’. Make it easy for a lender to grant you a loan by managing and recording your finances carefully.

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

If you whizz up Jan Smuts Avenue in Johannesburg too fast – that’s past Sandton and towards Rosebank – you’re bound to bag a whopping speeding fine (just after Dunkeld) and possibly miss the glorious suburb of Hyde Park altogether. So slow down, wind down the windows and take a moment to stop and smell the roses, darling. Ranked as one of top suburbs in the country, Hyde Park borders Craighall Park, Sandhurst and Illovo. These are exclusives addresses – Jozi’s very own version of Beverly Hills.

Wander around the area (if you have the patience for countless security booms) and you’re guaranteed to find yourself gawking at the places that some people call home. Sure there are flats on the outskirts of Hyde Park which are more accessible to the young-up-and-comings, but the majority of property in Hyde Park is grandiose and has a price tag to match. We’re talking enormous, old abodes where CEOs, MPs and other VVIPs reside. These are mansions with balconies that double as soap opera sets, indoor swimming pools, home gyms and sprawling lawns where soirées and canapés are the order of the day.

Flash freehold property in Hyde Park can set you back about R8m and then there are the super flash properties that go for anything in the region of R25m.

If it’s a lovely little flat you’re after, you’re looking at about R1,6m for a two-bedroom, two-bathroom spot.

According to Deeds office data, the most expensive property sold in Hyde Park over the past three months was R8,2m and the cheapest property sold for R1,3m.

We looked at the municipal value of the homes in one particular road in Hyde Park – Tweedale – and found that the average price of property is anywhere between R7m and R55m.

In terms of market stock, 56% is freehold, 38% sectional scheme and 6% of the properties in Hyde Park are estates.

According to property research experts Lightstone, the growth and activity in the area over the past few years has been impressive. Properties in sectional title schemes that went for R850K in 2004 were valued at around R1,6m in 2009. Freehold properties valued at R3,2m in 2004 were valued at R7,6m last year.

The market in Hyde Park is in very good health, too. In 2009, there were about 55 sales in the suburb.

So what makes property in Hyde Park so sought-after? It’s beautiful for a start: lush green gardens, leafy streets, huge stands (many with great views of Johannesburg north) and a nice mix of classy old houses, trendy homes and apartments too. Then there’s a great school, Hyde Park High, right in the centre of the suburb and one of Jozi’s most exclusive amenities on your doorstep: Hyde Park Shopping Centre.

Lydia Myers brought her two-bedroom two-bathroom townhouse in Hyde Park in 2006. She paid R950K for her 90sqm home.

“Hyde Park is just such a stunning place to live. I love how accessible it is from major roads like William Nicol and Jan Smuts – and then, of course, there are fabulous amenities right around the corner, like Hyde Park Shopping Centre.”

This is retail therapy at its best with a pick of the top boutiques and specialty shops around. From international brands like Pringle, United Colors of Benetton and Morgan, to local treasures like Jenni Button and Hilton Weiner, there’s something for everyone. Then, once you’ve done some damage on the credit card, you can go next door and enjoy a Cuban cigar on the deck of the new R190m Southern Sun hotel. It’s a great spot to bask in a splendid South African sunset. Article by Antoinette McDonald

For New Home Loans in Hyde Park  call 011.327.4489 or go to www.mortgagepluscc.co.za