3 Steps to Successful Home Loans

Applying for home loans successfully has becoming increasingly difficult. With a worldwide financial downturn, the banks are clamping down to try to decrease their losses. With stricter procedures, many individuals are struggling to get the needed finance, either for buying a new property or a further bond on an existing property. So for individuals that need to apply for home loans, there are some steps they can take to increase their chances of an approval.

No. 1

Make sure you qualify

This is especially important if you are purchasing a new property. First find out what amount you can qualify for on a home loan. Stay within this amount. A guaranteed way to have your application declined is by applying for more than you qualify for. The banks are not lenient with regards qualifying clients, and will not consider your application further.

• Affordability Calculator

• Bond Status Calculator

• Increased Installments Calculator

• Minimum Income Calculator

• Monthly Payments Calculator

No. 2

Home loans Affordability

Go through your budget and see how much you can afford to pay on a bond. And be reasonable when doing this. If you can’t prove to the bank that you will be able to afford this new expense, they will say no. By granting home loans their clients can’t afford, the bank is running a big risk of not getting their money back. This is a risk they are not willing to take.

No. 3

Have a good credit/payment profile

Your credit profile is the first thing the bank will look at. From how you have serviced your existing commitments they will draw conclusions, and decide whether they feel you will meet your new commitments. So make your full payments on time. Too much debt can also affect your application. So if you can pay something off, this can help with both your exposure and affordability.

Approved home loans are not something impossible. With a bit of planning and common sense you are very likely to be successful with your application.

If you feel like it is too much to tackle an application on your own, there are professional home loan consultants that can assist you.

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

Home loans up as banks relax lending rules

At the height of the property boom in 2006, South Africa’s four major banks were approving an average of more than 30 000 new home loans every quarter.

During 2009 this number had dropped to well below 8 000 as banks tightened lending criteria considerably in response to the global financial crisis, as well as factors such as interest rate increases, high household debt ratios and the effect of the National Credit Act.

However, with sharp cuts in the repo rate over the past couple of years, the prime lending rate has dropped to below its 2006 level and, according to property analysts, all indications are that banks have been slowly relaxing their lending criteria again. The result is that the number of new home loans approved is on an upward trend again, having increased by 10 percent since 2009.

Mortgage Plus recently completed a study of the number of home loans approved per quarter and loan-tovalue ratios of the four major banks – Absa, Standard Bank, FNB and Nedbank – from 2006 to the first quarter of 2011, to assess whether the strict lending criteria applied over the past few years since the economic crisis have eased.

“There is a slow and cautious recovery and there has been a slight drop in the first quarter of 2011, with fears of a double dip recession being mooted. But an upward trend in new lending for the residential market indicates that banks are developing more of a desire for risk,” says analysts .

“Boosting indications that lending criteria have relaxed is the fact the loan-to-value (LTV) ratios are on a similar upward trend. After dropping from an average for all banks and all market segments of almost 90 percent in 2006 to just 79 percent in 2009, they have climbed back up to an average of 82 percent since the first quarter of 2010.”

She says there is a significant difference in LTVs, however, once these are assessed in terms of market segment. Poorer households are accessing home loans of over 90 percent LTV whereas the LTVs for the comfortably off and super-wealthy are around 80 percent and 75 percent respectively.

“A number of factors account for this trend. The first is affordability – it is often simply the case that comfortable and wealthier buyers have cash to put down deposits and have often sold previous homes at a profit, whereas those buying in poorer areas may not have savings or the profits from the sale of a home to invest.

“However, it should also be considered that much of the bad debt on the banks’ books after the downturn in property values and rising interest rates caused many homeowners to default, came from the wealthier sector and higher-priced homes. Also, there has been pressure on the banks to contribute towards South Africa’s low-cost housing backlog by making home loans more accessible to lower income earners.

“There has been comment from the property sector that the strict lending criteria are a major factor constraining house price growth, and that in light of low interest rates this approach may be too conservative – creating something of a buyer’s market,” says Ivins.

However, she says, there is clearly light at the end of the tunnel.

“Interest rates are low, home loan accounts are performing better and lending criteria should become more lenient, which should stimulate prices and demand as household debt comes under control and banks resolve the distressed property sales and properties in possession still on their books.”

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