The leading banks usually offer various types of loans. At Mortgage Plus Bond Originators we will help you choose the one that best suits your needs and help you through the application process.

The following are brief descriptions of the various types of loans available.

ORDINARY LOANS

A loan granted to an applicant who uses the proceeds of a loan to purchase /acquire immovable property on which there are existing buildings and other fixtures or which is vacant land.

ORDINARY LOANS: FURTHER ADVANCE

Where the owner of fixed property that is already bonded as security for an existing loan requires further finance, the bank will grant a further advance subject to the value of the bonded property being adequate security for the increased loan amount. The client is normally allowed to use the amount of the further advance extended according to his own discretion.

BUILDING LOANS

A loan granted to an applicant to erect a building on a vacant stand (client applies for a full building package).

The loan is granted subject to a mortgage bond being registered in favour of the bank. After registration of the bond, the bank will advance monies to the client or his contractor as the building work is progressed (payment of funds is based on progress, e.g. land, foundations, roof height and finishes)

BUILDING LOANS: FURTHER ADVANCE

Where the owner of the fixed property that is already bonded as security for an existing loan requires finance to erect buildings, effect alterations, improvements or additions to the buildings already established on the immovable property. If the future value of the property when complete is adequate, the bank will be able to grant the further advance. The bank may advance the full amount immediately (depending on the security available against the mortgage bond), advance the amount as progress is made with the building operations, or may retain a portion subject to certain suspensive conditions. Where the margin between the loan account balance and the mortgage bond allows for such an advance to be made, the bank may do so. If the margin is insufficient, an additional mortgage bond will have to be registered.

ASSET-BACKED FUNDING

Mortgage Plus Commercial fills a void in the market for clients who require funding for working capital, need to reduce their bank exposure or need to meet other short term requirements. This product has been designed to meet the requirements of clients who are asset-rich but in need of short-term liquidity. Mortgage Plus Commercial does not lend against vacant land, but rather against residential, office, industrial and retail properties.

Minimum Requirements:

The borrower must be a juristic person in terms of the National Credit Act

• Maximum transaction value not to exceed 60% of valuation
• Valuation of property to be done at client’s expense
• Minimum advance of R 1 500 000 (no maximum)
• A first bond is to be registered over the property
• Maximum loan term of 12 months

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

Do you have a wish list of extensions, alterations or renovations to your home? We may have mental notes for such work, but few of us have considered the nitty-gritty of financing it.

In fact, a smart approach to home upgrades means the work can be relatively painless and even pay for itself if the property is suitably enhanced.

Funeka Ntombela, director of home loans at Standard Bank, said deciding how to finance renovations was the most important but frequently least considered part of the process.

“Renovations are done either out of necessity – like another baby on the way or a cottage for family – or a desire to improve quality of life, such as a new kitchen, moving the bathroom, adding a family room. Getting the best of both worlds – a great renovation that you can afford to pay for – needs detailed planning. We have to balance what we want with what we can afford. Hitting that reality later on in the renovation process can potentially cost people the very home they were trying to improve,” Ntombela said.

She warned that borrowing to fund renovations meant having to pay back the loan – irrespective of whether the renovation added value to the house or was a disaster.

“It is essential to bear in mind that whatever kind of loan you use, the bank will not have an opinion on whether you got value for money or whether you could not finish the job because the amount you borrowed was not enough to cover the inevitable cost overruns.

“Perhaps, more than any other financial commitment, renovating requires you to build into your planning the risks and likelihood that the job will end up costing more than you imagined,” Ntombela said.

“It is also advisable to build up and contribute some of your own savings to a renovation project, much like a deposit on other kinds of purchase. Your savings should be able to pay for some portion of the capital cost of the renovation. Showing the bank that you are contributing some savings will also help your loan application.”

She said an access bond was probably the quickest and easiest way to fund a renovation. “You will not have to explain what you are withdrawing the funds for, so the onus is very much on the homeowner to ensure that their planning is good and that the service providers deliver.”

Another option is what banks call a “further advance”. “This means that if the property is now worth substantially more than your existing bond, you can apply for a further advance. The amount would be added to your existing bond. The usual credit and affordability criteria would apply,” she said.

Two other options were to apply for a medium-term loan or a pension-backed loan. “A medium-term loan is an unsecured facility that banks may grant to certain kinds of customers with the right profile and history with the bank. A pension-backed loan is where your employer agrees to allow your pension fund to be used as security for a loan. The amount you can borrow will depend on how much you have built up in your pension fund,” said Ntombela.

Jacques du Toit, sectoral analyst at Absa Retail Bank, said using mortgage loans made the most sense. “It can be paid off over the longer term of the bond, rather than the short-term loan scenario. Loans are also usually granted at higher interest rates.

“With many bonds you have direct access, although you may have to reapply for further credit. If you have put cash amounts into your bond over and above your scheduled payments, you should be able to get that cash back for the extension work. Also, remember that it is difficult to take on more debt and loans, which again suggests using an access bond would be better.”

Pat Lamont, Nedbank Home Loans GM: sales and customer relations, said customers had two choices: a further loan with registration or one without registration.

“A further loan with registration allows the borrower to use his or her existing asset to raise funds for a variety of uses. The additional loan is secured by a second bond registered over the property, which has either increased in value since the original loan was granted or had surplus value at the time of original registration, or if the loan is being taken to improve the property,” Lamont said.

“However, all credit criteria in terms of repayment ratios and lending limits must still be met; that further bond must have preference over any third-party bond registered against the property; and homeowners’ insurance and life assurance may have to be increased if a bigger loan is taken.”

Lamont said minimum loan amounts of R30000 would typically be considered by the bank, with a maximum repayment term of 240 months. A registration fee on the additional amount was payable to the conveyancer, as well as an initiation fee as prescribed by the National Credit Act.

“The second option – a further loan without registration, otherwise known as a re-advance – can be offered to existing home loan clients who want access to capital already paid into the loan,” Lamont said. Clients with a history of making repayments could get the difference between the original bond amount and the current balance. “Minimum amounts of R15000 will be considered, with a maximum up to the original loan amount … repayments can be adjusted to suit the customer’s ability to repay and there are no additional registration costs,” Lamont said.

Mortgage Plus offers a wide range of advice on different bond options and further advice on the above. Please call us for further information on:

Complete this short form online

Call us on 011.327.4489

Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za