First time buyers

Well done! The decision to buy a home has proven to be one of the best made for millions of happy homeowners. It is 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 (R 1 200 per R 100 000)
• 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 0 % – 30%
• First time home buyers only
• Have a clean credit record.
• Minimum loan amount of R 100 000
• Single or joint income must be minimum R 6 000 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.

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

First time buyers’ FAQs

With the recovery in the residential property market looking set to continue, an increasing number of potential first time buyers are considering making what will be the largest purchase of their lives so far.

Craig Deats, provides answers to some of the most commonly asked questions by these first-time buyers:

How much can I afford? – Affordability Calculator

As a first-time home buyer it is important to know exactly how much money you can borrow for your new home and, most importantly, what monthly repayments you can afford. One should use affordability as the main factor in deciding the loan amount to apply for. Your bond originator will help you in calculating and determining what you can afford.

Determining the right price range is an essential first step to avoid wasting time looking at unsuitable properties. Make sure that you are aware of all the costs involved in buying a home. In addition to paying a deposit there are a number of other upfront costs involved such as legal costs, transfer duty, bond registration fees and bank fees. These costs all need to be budgeted for.

What criteria do the banks use to award home loans? – Documentation Required by Mortgage Plus

The main reasons for bond applications being declined are affordability and credit profile.Prior to the NCA affordability was a simple calculation based on 30 percent of income. Affordability is now based on net disposable income and for most people this means access to less credit than would have been the case in the past.A clean credit history and being up to date on all debt instalment payments is important.  Additional factors that banks look at would include:

• Your current financial situation.
• Whether or not your financial situation will change in the next few years.
• If your income is steady or fluctuating.

It is advisable that you shop around with multiple lenders. According to the latest statistics, 29.4 percent of applications in July 2010 that were declined by one lender were approved by another, indicating that it is important to approach multiple lenders to ensure a positive outcome on your home loan. Shopping around also ensures that you get the best rate on offer.

What information do I need to submit to the bank?

To assist the bank in determining its risk, you will be required to provide personal information such as bank statements, salary slips, a statement of assets and liabilities as well as information on your credit history, including whether you have ever been insolvent.

How can I get the best interest rate?

The lower the bank’s risk in lending funds to a particular borrower, the better the rate it will offer the individual.In calculating its risk, it will include factors such as the loan-to-value ratio (the amount of deposit you are willing to put down to offset against the purchase price thus reducing the required loan amount), the size of the loan as well as the repayment-to-income ratio (the ratio between the bond payment and the buyer’s income).

The size of the bond that you apply for, your credit history and the investment value of the property you intend buying are some of the factors that affect the rate you will be offered.

Shop around and negotiate with various banks to ensure you get the best package. A convenient way to do this is through the services of a bond originator.

Should I fix my interest rate?

If you are working to a tight monthly budget, and you can afford to, it might be prudent to fix your rate now even though fixed rates are usually higher than variable rates.

Many people make the mistake of waiting for rates to rise before locking themselves into a fixed rate. Before buying a property, stress test your budget to ensure you will still be able to meet your mortgage repayments if rates start to rise.

How can I calculate the transfer and registration costs? – Pre approval and Bond Cost Calculator

Calculators like the one found on the Mortgage Plus website (www.mortgagepluscc.co.za) will help you determine the exact costs involved and will enable you to work out your future repayments if rates increase.It’s advisable to try and make your budget stretch to cover an interest rate hike of three hundred points above your initial variable rate.

What deposit should I put down?

Besides improving your chances of getting your home loan approved, a bigger deposit could result in a more favourable bond rate which will save you in interest over the term of the loan. As a home loan is paid back over a long period, generally between 20 and 25 years, even a small deduction in the interest rate on your bond can save you thousands in interest payments over time.

How can I bring down my monthly repayments?

The less you owe the smaller your monthly loan repayments will be, so put down as big a deposit as you can afford. Never miss an opportunity to pay extra funds into your bond, such as your 13^th cheque, share payouts, tax refunds and bonuses. Paying in even small amounts over and above your normal repayment can knock years off the term of the loan and substantially reduce the interest payable.

Should I use a bond originator?

Bond originators specialise in shopping around with multiple banks and negotiating the best deal for the customer. Obtaining a preferential rate of just 0.1 percent below the prime rate can make a big difference to your monthly repayments.

However, in negotiating the best package, the bond originator needs to take more than just the rate into account and will structure a package that best suits the individual’s needs overall. To secure a competitive rate, the originator maintains relationships with several different banks, enabling him to compare their offerings, make a recommendation to the client and then obtain fast approval of the loan.

The service offered by an originator includes facilitating bond negotiations with all major lenders in one simple process from prequalification to registration – with less hassle and minimal paperwork. The originator will also provide regular feedback of progress on your application. The service is free to homebuyers. Bond originators already source over 60 percent of all new home loans in South Africa.

Remember by choosing us for a loan, you will get professional advice 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