Hidden Costs in a Mortgage

Most every loan is going to have associated with it fees for insurance, valuation, etc. Most of these fees are commonly required amongst all lenders and they must give you a list of their costs associated with a mortgage. Despite the fact that the costs are disclosed, some lenders may include extraordinary “junk” fees in their costs that an unwary buyer may not recognize as an extra fee. At the time of a loan application lenders are required to give you a written closing cost estimate.

First, determine if you’re rate are being loaded. Some lenders advertise artificially low rates to attract customers but load up on fees to compensate for a lower rate. A tip off to a lender that charges hidden fees would be a lender who advertises interest rates that are appreciably lower than the competition. Interest rates are very competitive and shopping for the very best rate may in fact work to your disadvantage. Differences in rates of 1/8^th or 1/4^th of a percent result in very little difference in a payment and may be offset by poor service and added hidden fees.

Mortgage companies and fees. Mortgage companies often advertise that through their intervention the financial institution will subsidize the client’s bond registration fees. But, at what cost to the client? Saving R2 000 for example in bond registration fees, but ending up paying R200 000 more in interest is a great deal for the bank, but not for the client.

Mortgage companies are often owned by a bank or an estate agency. The real issue is a serious lack of independence and conflict of interest. Clients have no guarantee that their mortgage application will be channeled to the lender that offers the best interest rate instead of to the one offering the broker the highest commission. These fees will be subsidized by the banks customers in the form of higher charges and higher interest rates.

Always work with an mortgage firm that is independent from any bank and who’s services are FREE and without any premiums attached to the client like Mortgage Plus.

Correcting Past Credit Problems

Contrary to what you may have heard, credit reports are for the most part accurate. Common last names and a “Jnr.” in the family does cause a few problems but credit reports identify people by their identity number, address, and name. If you have an issue with your credit report, credit-reporting agencies are required to attempt to resolve the problem. Most of the information has to be provided by the individual and they should stay in touch for as long as it takes, frustrating or not. There are two main credit repositories in South Africa: Trans Union, and Experian. These companies each hold a database of information and provide it to a more local credit-reporting agency that may actually be issuing the report. If you have a dispute, you can go direct to the two repositories to attempt to clear the issue.

As mentioned before, credit scores in the 500 range can cause problems when attempting to obtain new credit. You can raise your score if the original information was incorrect, or you can over time improve your payment history, but it may take a few years of diligent payments to appreciably raise your credit score.

If worse comes to worse declaring bankruptcy  may be your only answer, but despite its growing popularity, I recommend it only as a very last resort. A bankruptcy will stay on your record for years and make obtaining credit difficult. There are two methods to declare bankruptcy: Voluntary and Compulsory Insolvency (bankruptcy). If your creditors have you sequestrated, this is known as compulsory sequestration. If, however, you decide to have yourself declared insolvent, such act is referred to as voluntary sequestration.

Should you not have yourself declared insolvent, but wait for your creditors to take the necessary action, there is a possibility that they will not succeed in their application for a court order. It may no longer be in their interest, on account of the fact that your assets are worth too little to them.

In the absence of compulsory sequestration, your debt simply increases further (as a result of interest), and your financial suffering is aggravated and endures for longer. The descriptions above are overly simple and general, but the bankruptcy option is a poor one and you should explore your options with an attorney before making a decision. After a period of time a rehabilitated insolvent may apply for credit, but this will depend on numerous factors. Most lenders state that at least a year must pass after a person’s been rehabilitated and a new good credit history must be established. A difficult chore, but it can be done. Make sure that rent or mortgage payments have no late payments for at least the previous 12 months. Avoid paying in cash; make all payments by check or credit card where your payment history can later be verified. It will also help to explain to your lender that the situation that originally caused the problem, a job loss, illness, etc., has now been resolved.

To learn more or if you’re interested in getting a loan, or are worried about debt, make an enquiry with Mortgage Plus at www.mortgagepluscc.co.za or call (011)327-4489 / morne@mortgagepluscc.co.za

Credit scores are one of the most important factors that lenders consider when someone applies for a home loan. An individual’s score is considered to be an indicator of his or her creditworthiness. It goes without saying that the higher your credit score, the more likely it will be that you get approved for a home loan.

You can use a minimum score of 640 as a guideline that will determine if you will qualify for a mortgage or not. If it’s lower than 640 then you will have a hard time getting approved for a home loan.

Factors that are used to calculate a person’s score include: the amount of credit you have currently available, your history of making payments on time or not etc.
If your score is low at the moment it will be better to try and improve your score before applying for a mortgage loan.

One of the best ways to improve your credit score is to pay your accounts on time. A history of prompt payments will show lenders that you take your debts seriously.

Avoid taking out too much credit. For the best credit rating try to have only one or two credit cards and one or two major debts (like your mortgage and car) If you have a lot of credit cards, try to make sure that you use no more than 50% of your credit.

For example if your credit card has a limit of R10 000, make sure that you don’t use more than R5 000. If you can get it lower than 50% it will be even better. What’s important to remember is, the lower the percentage of your total credit limit you are using, the better.

It’s not uncommon for errors to show up on credit reports, so be sure to check your credit score on a regular basis.