Defaulting on your Home Loan
It is an undisputable fact that many South Africans live above their means. Let us face it, we love the good life. With the worldwide recession at hand, high interest rates and job losses increasing, many South Africans have fallen behind with their home loan payments.

People are losing their homes
Currently 1 200 homes are being repossessed by banks and other mortgage lenders each month. According to the Alliance Group the luxury property market is not being spared – there was a 240 percent increase in the number of loan defaults on home loans with balances exceeding R5 million.

What happens when you default on your bond payments?
If you miss one month’s payment the bank will send you an arrears letter and ask you to rectify the situation, usually within seven days. If you do not pay your arrears and fall into two months in arrears the bank will send you a Letter of Demand. The procedure differs from bank to bank and also depends on what is stipulated in your Loan Agreement. Some loan agreements allow banks to skip the step of sending you a letter of demand and start with legal action immediately.

In defence of the banks we must say that, in general, with this economic crisis being so fierce, they have been very accommodating in trying to assist clients who found themselves unable to keep up with their bond payments.

Ignore the Letter of Demand at your own peril
Should you ignore the letter of demand or simply can’t meet the demands and allow your home loan to go even further into arrears the bank will issue summons against you. This legal process in which the bank’s attorneys institute legal action against you is called foreclosure.

The process of foreclosure
If your outstanding home loan is up to R100 000 the matter can be heard in the Magistrate’s court. You will usually give consent for this limit to be exceeded (where the balance exceeds R100 000.) If you do not give consent the bank’s attorneys will have to institute legal action in the High Court.

Where a bond was registered in more than one name, like husband and wife, both parties will be served with a summons. The Sheriff of the court will serve the summons to you in person. If you are not present at the address you have chosen as your domicilium address the sheriff may affix a copy of the summons to the principal door of the domicilium. Your domicilium address is the one you provided the bank with when you took out the home loan and at which they may serve legal documents on you.

You have been served with a summons, now what?
You have five working days to respond from the day the summons was served on you, if done through a Magistrate’s court. If it takes place through the High Court you will have ten working days to respond.

This is your last opportunity to save your home, contact the bank’s attorney to try and make an arrangement to bring the arrears up to date. If you do not respond to the summons the bank will file an application for default judgement against you.

Sale in execution and the results thereof
When judgement has been obtained the property will be attached by the Sheriff and the bank will arrange for a sale in execution. By this stage you would have been blacklisted and your chances of getting credit is virtually zero.

If the house is sold for less than the outstanding amount you will remain responsible to pay back the outstanding amount to the bank, as well as all the legal costs incurred.

Don’t allow this to happen to you
We have not painted a pretty picture so far and it is indeed a very traumatic experience for anyone to go through. If you can prevent this from happening to you and your loved ones, you should. The first rule is to take action right from month one of going into arrears. Ignoring all the steps from the bank to contact you give them the message that you are not interested in saving your home.

Talk to your bank, there are a number of ways in which they may try to assist you, such as a payment holiday for three months, or paying only the interest for a number of months, or extending the term of your loan. You can obviously also try to sell your home before the bank does it for you.

Even in the worst circumstances it will be less stressful to play open cards with your creditors. You may be able to save your home, which is still the biggest investment most of us will make in a lifetime.

CONTACT US

To 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

Buying Your First Home: Everything You Need to Know Before Taking the Leap

Buying your first home can be a daunting experience; with all the hype in the news about high interest rates, repossessed homes, and the near impossibility of obtaining a home loan most people are running, sprinting, towards renting a home instead of running the risks of buying one.

But even with all the negative press about the current state of the property market there is no better feeling than owning your own home. And with interest rates about to drop there is no time like the present to take the plunge. Here is everything you need to know before buying your first home …

Be Pre-approved:Nothing beats the piece-of-mind of shopping with a pre-approved bond. Arranging a pre-approved bond will minimise stress when shopping for your new home; knowing what you can afford will allow you to narrow down the search and save you the time of looking at things you can’t afford and that aren’t suitable. www.mortgagepluscc.co.za

Plan Ahead for Success:

 Before setting out to buy a home, it pays to think about your needs. Often one may fall in love with “the perfect house” only to find that the home is not in the right area or that the garden is too big to manage. If the home is for a family, the needs of the whole family must be considered – husband, wife, children, and sometimes even grandparents. Think about how many bedrooms and what size kitchen is needed; and whether having a garage is important. Do you have a dog and need the property to be fully fenced?

Very few people have the money to buy exactly what they want, so make a list of your requirements and break it down into “must have” and “like to have”. It will help you when you start looking at homes. Then think about the area where you want to live – is it quick and easy to get to work? Are there schools and shops nearby?

Monthly expenses need to be carefully budgeted before you even start looking. Owning a home not only means paying a monthly bond installment but has many new bills too. Make a list of everything you’ll have to pay – bond instalment, rates or levies, house insurance, mortgage (bond) protection insurance, electricity and water, repairs and maintenance; and make sure your budget can afford everything you have listed.

Know your Agents:

Get to know the agents in the areas you are searching in and inform them about what you are looking for and your price range. They will be able to notify you when new properties come on the market and can provide a tailor-made service to suit your needs.
Putting in an Offer to Purchase

Once you have seen a property you like, the estate agent will help you draw up an “Offer to Purchase”. This document contains all the terms and conditions of the sale, the purchase price, the payment terms, the date you will take occupation of the property, and the occupational rent.

Occupational rent is a monthly amount paid to the seller by the purchaser to occupy the property prior to the date of registration of transfer of the property into the name of the purchaser. Alternatively occupational rent could be paid by the seller to the purchaser if he/she needs to continue occupying the property for a period after registration of transfer.

If you plan to take out a home loan, the “Offer to Purchase” must include a condition that the sale is subject to bond approval being obtained within a realistic amount of time — i.e. 7 – 10 working days. Once you have confirmation that your loan has been approved, you must notify the estate agent immediately to ensure that your offer becomes unconditional and to enable the process to continue.

This condition is very important, because if you are not able to secure finance, the “Offer to Purchase” will terminate and become null in void, and neither you nor the buyer will be liable to pay any costs or penalties.

The Offer to Purchase should also include details of any unusual fixtures or fittings which are included in the purchase price, or which the seller might want to take with him when he leaves. Generally all items which are “fixed” remain in the house, but furniture, loose carpets and appliances go with the seller. This is where conflicts often arise, so it’s best to ensure any important items are noted in the contract.

Take the time to find out everything you need to know about a property before signing anything. Visit the house for a second look – you may have missed something the first time. Always express your concerns to the estate agent and ask them to assist you in clarifying any problem areas that you may have or consult an Attorney. Once the seller has accepted and signed the offer, it becomes a contract binding on both parties. However, if the purchase price is R250 000 or less, the buyer has the right to cancel the offer within 5 days of signing the Offer to Purchase. This must be confirmed by the buyer giving written notice to the seller and the sellers’ agent within those 5 days.

Applying for a loan:

As a first time home buyer there are a number of special criteria which you’ll need to fulfill in order to qualify for a home loan.
One of the most important factors to consider is what size bond you can qualify for; often this is about 25-30 percent of your salary, however if you and your partner apply for the loan jointly you may be approved for a larger loan amount.

Upon the application for your home loan the bank will consider the Loan-to-Value ratio (LTV) , which is the ratio between the home loan amount you are applying for and the value of your property. This is an important factor as the LTV percentage forms part of the interest rate calculation on your loan amount.

The maximum loan term offered by all banks is twenty years, and some banks require a life policy to be ceded to them. It is important to clarify this with your bank immediately.

 The general requirements of applying for your first home loan are the basic details of your monthly salary, your credit history and the offer to purchase.

The following criteria will need to be passed to qualify for a home loan;

- You must be 21 years or older
- Proof of six months of permanent employment or at least two years of self-employment,
- Minimum salary requirements can vary between R8 000 and R10 000 per month joint or single income.
- You’ll need to have a credit clear history – i.e. no judgments or defaults.
- Some banks may require SA citizenship.

Also Make sure you have all the following documents available.

- Copy of ID
- 3 months bank statements.
- Offer to purchase, which is the written agreement between the seller and the buyer on the purchase price of the property. Sectional Titles must submit most recent body corporation financials.
- Most recent pay slip, commission earners will need to submit 6months pay slips.

- If you’re a self employed business owner:
- 6 months business accounts statements
- 6 months personal bank statements
- a letter from auditor or accountant stating monthly income.

Taking Ownership of Your New Home:

Once all the conditions of the contract have been met and the deposit paid, the next process is the transfer of the property into your name and the registration of the Mortgage Bond at the Deeds Office. The Conveyancing Attorneys handle this part of the loan process and will contact you when the documents are ready to be signed.

The seller will also have to provide you with an Electrical Clearance Certificate, as well as a document stating that the property is pest-free. These conditions may vary depending on which province your property is situated in.

The registration and transfer process normally takes between 8-10 weeks if there are no unexpected delays.

The day the transfer is registered in the Deeds Office is the day you become the legal owner of the property. Your lender will start the insurance policy and begin charging interest on the loan and will inform you when the first instalment becomes payable. From this date onwards you are also responsible for paying rates and levies — or earlier, depending on conditions of sale agreement.

Once everything is finalised:Once all the Is are doted and the Ts crossed you can finally enjoy your home. Transform your new house into a home by personalising your space. Focus on making your home a comfortable space where you can unwind and have fun; after all you will be sacrificing a large portion of your income to stay there.

And don’t forget to think long-term; boost your future re-sale value by ensuring that you keep your home updated and looking good. Budgeting for routine maintenance and unforeseen emergencies will ensure your home stays looking as, if not more, beautiful than when you bought it.

Words by: Crystal Espin

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