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Mortgage Advice – Let’s Bond Together Let us bond together “Let’s bond together” … Purchasing land or a property is a great investment and it is important that you have an understanding of the South African bond market and how the home loan industry works. For instance, the words “bond”, “home loan” and “mortgage” are used interchangeably in the market to describe a process by which your home is pledged as security or collateral in return for the finance to pay for it. The four major lenders in South Africa are First National Bank, Absa Bank, Nedbank and Standard Bank. These financial institutions predominantly offer their home loan products through specialized mortgage brokers or bond originators. This enables banks to offer their prospective clients dedicated and accurate bond advice and currently around 80% of all home loan business is conducted through bond origination companies like Mortgage Plus – 011 327 4489

5 Great Reasons to use a Bond Originator:

• Secure approvals: better chance of approval by submitting to multiple lenders
• Get the system to work for you: take advantage of the fact that each bank has different credit criteria, deposit requirements, documentation requirements, interest rates and turn-around times
• Expert positioning: prepare, motivate and package the application for the best chance of approval
• Best interest rates: banks compete for every loan application ensuring you get the best deal
• Simultaneous submission: direct interface to lenders systems allowing simultaneous submission of applications to multiple lenders

How the Bond process works:

If you are thinking about a new purchase it helps to understand the options available to you which ultimately saves you money. STEP 1: House hunting STEP 2: Sign offer to purchase. STEP 3: Seller accepts offer. STEP 4: Contact MORTGAGE PLUS. STEP 5: Financial Institution will confirm requirements. STEP 6: Property Valuation done by bank. STEP 7: Decision taken by bank. STEP 8: Final approval. (Letter of Grant) STEP 9: Registration attorney instructed to attend to the registration. STEP 10: Customer to sign documents at 2 sets of attorneys. STEP 11: Home loan registered in buyers name at Deeds Office. STEP 12: First monthly instalment due within 30 days of registration date STEP 14: Get your CASH BACK BONUS from Mortgage Plus. STEP 13: Title deed & sent from attorney to Bank for safekeeping. Many potential property buyers are currently in the process of shopping around for homes throughout South Africa. Should you require a New Home Loan or First time buyer home loan then kindly contact me to discuss.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Information on how to apply for bond finance to help purchase a home has been disseminated by SA’s banks and bond originators in a steady stream for some years.

Yet says Rob Lawrence, he and his team find themselves daily dealing with false assumptions which often reveal a deep-rooted ignorance as to the rules of property purchasing and how to finance these transactions.

Lawrence is now in the process of distributing a short memorandum on this subject to Rawson Properties’ 146 franchisees countrywide. He says this should “help scotch some wrong ideas” on the part of aspirant home buyers and avoid wasting unnecessary time in the home loan application process.

Entitled “Six common misconceptions about home purchase finance”, Lawrence’s memo lists the following as beliefs that most commonly lead to problems:

1. Minor or not too serious credit defaults in one’s past will either go undetected by the banks or will be overlooked.

“There is a perception that, for example, a missed instalment or two on household appliances or a car is no great issue. However, every credit payment failure is a black mark on the applicant’s record and the chances are high that it will have been recorded.

To get a big percentage bond, you have to have a completely clean record,” says Lawrence. A bank might still make an offer to such a client, but it certainly will not be above 90%.

2. Those able to get a loan at 2% below prime previously will be able to do so again.

This misconception crops up regularly with those who bought in the boom times prior to 2007 and probably did get a very favourable rate then, says Lawrence.

He says today the banks are pricing for risk (as they perceive it in the client’s position) and for increased profits. In practice this means that, even with “good” clients, bonds are typically awarded at the standard rate or often above it, i.e. 9.5 or 10%. Those who now get even 1% below prime, says Lawrence, are the fortunate low-risk few.

3. The applicant’s own banks will give them the best deal.

Lawrence says regrettably every bank has different lending policies and different views of risk. “Every loan is treated on its own merits and, as the banks’ lending criteria are all different, the borrower will quite possibly get a better deal from a bank he has never dealt with before.”

4. A bank valuation on the property means that the bank has given it a “clean bill of health” and it is in an acceptable condition.

This is not the case, he says. The bank valuer’s task is simply to assess the market value of the home at the time it is bought.

5. Home buying and getting bond finance are not for the poor.

Lawrence says this is definitely not the case. SA’s banks he says have committed themselves to the affordable (R350 000 to R500 000) market and, if anything, are inclined to be a little more lenient in their rulings here than on the more expensive properties.

“The goal is to make South Africa a property owning nation, and the latest figures from FNB do show a big rise in first-time home buyers, who now comprise 23% of the total.”

6. The bond applicant working overseas and earning a big salary will be considered a good loan risk.

Again, says Lawrence, this is not true – the banks have seen too many cases in which, on returning to SA, the high wage earner has had to settle for a substantially lower salary which in turn, has made it difficult for him to service a big bond perhaps granted on the higher income he was earning overseas. The banks therefore tend to limit overseas applicants’ bonds to between 50% and 70% of the purchase price, he adds.

Is there a general rule of bond financing illustrated by these common errors?

According to Lawrence the rule is that those who persevere win in the end.

“It may take time, but if the applicant works at qualifying for a bond, he will often do so in the end, even if he has to lower his sights in the process.”

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za