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

While each home buyer will have their own criteria as to what their home must have based on their life stage and personal preference, there are a few key elements that home buyer’s in the current market seem to agree on, RE/MAX of Southern Africa.

The right price

According to RE/MAX the first thing that the majority home buyers must have is an affordable price tag, especially first-time home buyers because they often don’t have the equity from selling a property to roll into the next purchase. Although aspects such as space and the aesthetic appeal of the home are important, for most part the financial elements and affordability are top priorities.

“It is important for buyers to have a budget and make sure they stick with what they can afford. Buyers shouldn’t overextend themselves in the current market as it is highly likely that if they do, they will experience financial pressure in the foreseeable future. With house prices decreasing over the past few years, as well as the current low interest rates, properties that were previously unaffordable to many home buyers are now within reach. This has significantly opened up the market to buyers who now have more options available to them while still managing to stay within their budget limitations,” says RE/MAX.

A home that meets future needs

RE/MAX says that although it is impossible to know what the next ten years may hold, the reality is that many home buyers will be in their home for longer than they think. It will pay off to purchase a home that doesn’t just meet the criteria now, but also in the next five to ten years.

“Property is a long term investment. A must-have now may not be one in a few years, so home buyers should look at property and ask if they can see themselves staying there for a while and what the future looks like. Is marriage on the cards or perhaps children?  If so, then an extra bedroom would probably be of higher importance than granite counter tops.

A prime location

It might be an old cliché but there is certainly a lot of truth to the location, location, location adage. This mantra rings true for home buyers in any market; location will always be high on the must-have list. Whether it is a question of lifestyle or good return on investment, buying a property in the right location will be one of the most important decisions a buyer can make.

RE/MAX notes that vital aspects to consider when deciding on a location would be:

Proximity to your place of work.

• A location convenient to local amenities such as medical facilities and shopping centers.
• A neighborhood / estate or complex that is well-maintained and is aesthetically pleasing.
• Buyers with children or plans for a family should look at the quality of schools in the area.

“Try to find an area that is established and has a history of solid returns that have been stable over the long term. Look for areas that have kerb appeal that are well maintained and where there are more owners than tenants, as owners will predominately want to protect their investment by keeping the area well looked after.

A house that has been properly maintained

Buying a house that has been properly maintained by the previous owner can help alleviate a large number of costs in the future. He says, “With the introduction of the Consumer Protection Act many buyers are insisting on the list of defects that the act prescribes, even though legally it may not be applicable. It is important for them to know that they are purchasing a property that is in good repair.”

While a quick run through and spot check of the home can help buyers sift through their options and narrow down the property they would most like to purchase, it is best to have a professional inspector undertake a thorough check and advise accordingly.

Contemporary updates in key areas

Although the property may not be completely renovated, there are certain areas of a home that buyers place a higher priority on, says Goslett. This is because there are some rooms in a home where renovations will add more value in terms of resale at a later stage.

For example, kitchens and bathrooms are known to get sellers the best boost in value, with many sellers recouping as much as 80% of their renovation costs on a kitchen and between 65% and 75% of the costs of remodeling a full bathroom. “These two areas of a home are the most important to buyers when looking at prospective houses. If they have been renovated or simply updated by the previous owner, it will have a big impact on the overall appeal of the home.

Goslett concludes by saying that given the fast options available to buyers in the current market, sellers should take these must-haves into consideration when wanting to successfully sell their property in the shortest possible time.

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