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

First Time Buyers
Well done! The decision to buy a home has proven to be one of the best made for millions of happy home owners. It’s a fact that property is a good investment, especially when you compare it to paying rent. It is important, however to enter the property market with a good understanding of how a property purchase works, what your costs will be and a respect that this is probably one of the largest financial commitments you will ever make.

 
Best advice
Your Mortgage Plus consultant will give you the best advice on all aspects of your home purchase, and most importantly on financing it, particularly when the banks differ in their approach to lending. We will help you understand the different interest rates, fees and charges, and terms and conditions available. We will explain to you the features of the different loans and why they are more suited to your individual requirements.

 
Important Pointers
• Know what you can afford and the costs

• Consolidate your finances

• Significant savings are possible by consolidating all your finances. As home loan rates are significantly lower than those for personal loans, overdrafts and credit cards, but significantly higher than savings and current account rates, it makes sense to consolidate everything into your home loan account.

 
Minimise your Mortgage
By effectively structuring your finances, you can significantly reduce your total home loan debt. Arranging part of your salary to be credited directly to the loan and making additional repayments on an ad hoc basis (like when you get a bonus) will have very beneficial results. By sticking to a workable monthly budget and avoiding unnecessary debt, you can repay your loan much more quickly and save vast amounts of interest. To find out how much interest you can save and how many years you can take off your loan, contact us today.

 
Example

You can settle your home loan in 5 years:

• Pay off an extra 1.2% of the original capital debt each month (R1 200 per R100 000)

• Adjust for interest rate changes when they occur

• Don’t access funds already paid off

Whilst this may mean some sacrifices, you will save a fortune in interest.

 
To qualify:

• Deposit of anything from 15% – 30%

• First time home buyers only

• Have a clean credit record.

• Minimum loan amount of R100 000

• Single or joint income must be minimum R6 000 a month

• Your monthly bond repayments cannot exceed 30% of your gross monthly income. Also refer the National Credit Act stipulations.

• Permanent employment

You can take advantage of the option provided by certain banks of a 3 month holiday on home loan repayments.

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

Second bonds might be the solution for some homeowners. Being a homeowner leads to a great many expenses, both expected and unexpected ones. In most cases, new homeowners calculate the expected costs into their budget so they understand how much house they can afford to purchase while still having some money to play with.

Unfortunately, those unexpected costs can add up and lead to spiralling debt and a life of stress-related days. Maybe you think you can handle it on your own and you are doing great until the unexpected repairs seem to come on a regular basis, knocking at your door and depleting your wallet every month instead of every year. Then, you suddenly realize that this is what they don’t teach you about either in school or at home.

Perhaps it’s time to do something sensible about it instead of using the credit cards to pay for the necessary repairs or borrowing payday loans to pay off the servicemen and equipment. After all, a second bond is going to have lower interest rates than either your credit card account or a payday loan.

Plus, in most cases, the interest charges are tax deductible and can lead to added savings for your bank account at income tax time. Better still, since you can select a term of 10 or even 15 years, the monthly payments might not even be that large. But just what is a second bond?

Second bonds are simply loans that are taken out after the first or primary bond. They are often referred to as second mortgage loans and are often placed on a home while the primary mortgage is still in existence. Although the homeowner will need to make the same type of decisions with a second mortgage as with a first mortgage, the expense is considerably less.

The homeowner who is interested in a second mortgage bond will need to determine the type of loan they want to obtain such as variable rate or fixed rate. Plus, he will also need to submit an application, similar to the one he submitted for his first bond, as well as prove that he is capable of repaying the bond. Additionally, he should calculate how much money he would need to borrow in order to cover all of the new expenses.

Once you have acquired a second mortgage bond, revamp your budget to include your new payments. You can use the proceeds to pay for the new repairs, pay off existing credit card debt, and possibly have some money leftover for any new repairs that happen to arise in the near future.

To apply for a second bond 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 a second bond 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.

Please Phone us on (011)327-4489 for more info. www.mortgagepluscc.co.za