Save Thousands!

How do you feel about your home loan? Are you comfortable with what you owe? Do you simply look upon the monthly instalments as the equivalent of paying rent? Do you ever think seriously about owning your own home without any encumbrances and the freedom of knowing that you do not have to pay thousands of Rands each month just on interest?

Reducing your Mortgage Debt

One of the most profitable decisions you can take as a home owner is to pay an additional amount each month on your loan, no matter how small it may be. Your bank will stipulate a required minimum monthly instalment which will repay the bond over twenty years. You need to make provision for an extra amount each month that will effectively reduce the capital debt with each instalment. If necessary sign a new debit order at your bank against your current account, making allowance for whatever extra amount you can afford. A debit order is an effective form of selfdiscipline – you do not have to motivate yourself each month to make that extra payment.

You can, at a later date, revert to the original instalment if your financial situation should deteriorate. At least the extra payments you made in the good times will stand to the credit of the loan account. By that time, if times are really hard, you may be able to negotiate a reduced instalment well below the original amount as a result of the lesser amount owing on the capital sum.

The Effects of Paying More

There are many other benefits deriving from accelerated payments.
Your equity (the difference between the net resale value and the outstanding bond balance) in the property will increase at a much faster rate, and you will soon create some real financial breathing space which may be invaluable in a time of crisis. This cushion of flexibility during hard times can be the difference between surviving and complete financial collapse leading even to personal insolvency.

Accelerated payments are a form of tax-saving – you are effectively investing your money at the current bond rate tax-free, while anyone putting the same amount on a fixed deposit, for example, will be earning up to 5% less with tax being payable on the interest received.

Banks generally no longer apply the penalties they used to for paying off your loan earlier than the regulated period and you should check this out first. Read your mortgage loan agreement carefully to see if your bank has reserved the right to add penalty interest for accelerated payments. Those who live on credit pay so much more later for pleasures long gone and forgotten. Others who pay more now, pave the way for happier times to come, and peace of mind that can only be envied by those who do not have it.

Other ways

* Earlier monthly repayments
A large number of home loan account holders pay their monthly payment on the last day of the month. Paying it when you get paid (say 26th) will result in interest savings.
* Once off payments
Should you receive money as a bonus you may wish to pay some or all of it into your home loan. By paying for example, R10,000 into a R100,000 mortgage a few months after your repayments started – would pay off your home loan in 12 years instead of 20 years – assuming an a interest rate of 18%.

Dangers of Incurring Excess Credit

Avoid the temptation to access your equity once you have created it. Months of painstaking saving can be blown away in a moment of rash spending. Especially avoid being taken in by those occasional letters some banks send out, telling you the credit amount you can take as a re- advance coupled with a dazzling array of ways in which you can literally waste it.
It has been said that the average South African consumer can easily be identified. He is a man who spends money he hasn’t got, to buy things he doesn’t need, to impress people he doesn’t like! Some people unfortunately just cannot resist using any credit that may be available without anticipating the day when the tap will simply dry up and there is quite simply nothing more to access. By that time the consumer will have unwittingly reached the end of the line in more ways than one. His debts will be astronomical, and his monthly commitments will have become almost intolerable.
Many a poor soul has faced this El Nino of personal economics too late to conserve any water for the drought ahead. Worse still, it is at such times that the good days may suddenly come to an end, leaving the victim to face crises that cannot be resolved. So often it is just at that time when there is no mare to borrow, that interest rates start rising and debts are called up.

Make that Extra Effort to Create Capital

The wisdom in making a supreme effort to live within your means cannot be overstated. It can often be achieved just by cutting out those little indulgences we allow ourselves. That weekly trip to a local restaurant, those extra beers for the weekend, those weekends away on package deals at up-market resorts – say “No! “ to most of them and you will reduce your loan debt far more quickly and effectively than you may imagine.

An exercise of self-discipline upfront can soon become the norm and you will not even notice that extra amount you are paying each month. You can build your equity faster and ensure that you will not be stung when crises do come, such as the global financial disruptions that sent interest rates through the roof. The discipline of not reducing your monthly instalment, should interest rates fall, will help even more. Take a few years off your loan and add those years to your life!

Click Here to go to our Increased Instalment Calculator

Mortgage Plus will find the right deal for you. Guaranteed!

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

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Tips on getting that home loan with which you can buy your own home

Even though property prices have soared in recent years, you can probably still obtain a home loan to buy your own home if you are earning a regular salary. Here are some ways that you can get that home loan you need to become a home owner without needing an excessively high income.

You do not have to take your home loan over a 20-year period but you could stretch it over a 30-year period. This will cause your monthly repayments on the home loan to be lower which will allow you to afford a higher loan amount. On the negative side this kind of home loan will cost you more over the long run in the form of the interest you will pay. You can use our Bond Calculator to calculate and compare the home loan amounts you can afford over a 20-year period and a 30-year period.

If you cant afford a home loan on your own salary consider buying a home with a partner. Instead of looking at your personal income as a measure for calculating an amount you can afford on a home loan, banks will look at the joint gross income of the two partners buying property together. If your gross income is R4000 and that of the partner is R8000 the bank will calculate the amount that you jointly qualify for on the combined R12000 income. The bank usually will not give a home loan on more than 30% of the gross income so jointly you should be able to get a loan for R400000. If you decide to take this option make sure that you sign a legal agreement with the partner on the amount each will pay on the repayments of the home loan and how the proceeds should be spilt when the home is sold in the future.

A common mistake prospective home buyers make, especially first time buyers, are that of aiming to high. Only for a hand full of people will their first home be their dream home. It helps to get into the property market first with a lower value home and after a few years, with the increase in value of your property and promotions in your job, you will be able to afford a better home.

Keep an eye out for special deals offered on home loans by the various banks in South Africa. There are good home loan products specially designed for first time home buyers who do not have huge incomes or cash on hand to pay deposits on the home loans. Always try and negotiate with the bank on a better interest rate as even a small decrease on your interest rate can make quite a large difference on your monthly repayments. For a family on a tight budget even a R100 less per month spend on your bond can make a big difference.

You can often bargain with a home seller to get the price down to something that you are more able to afford so do not just accept the first offer as something you cannot afford. Also keep in mind that many of the cheaper properties are not always advertised so drive around in your area and look out for the “For Sale” signs in front of houses. Do this especially on sundays as this is the day most sellers choose to place their homes on show.