Don’t overload your home loan

It may be tempting to consolidate household debt by utilizing a refinancing option on one’s home loan, but homeowners need to be careful that they are not jumping out of the frying pan and into the fire by placing too heavy a burden on their repayments.

This warning comes from Morne Prinsloo, MD of Mortgage Plus, who adds that overloaded monthly bond repayments could result in the bondholder losing his most important asset at the end of the day through foreclosure by the bank in the event that he fails to meet his installments.

“Banks do offer convenient ways of refinancing other household debt, particularly as home loan mortgage rates are generally lower than overdraft or credit card rates at the moment,” says Prinsloo.

“But consumers need to be careful that they are not pushing up their loan repayments to unmanageable levels by doing this.”

Prinsloo adds that consumers also need to be aware of the costs associated with applying for further home loan facilities. These could include property assessment fees and bond registration costs. “Consumers should ensure that these costs do not nullify the benefits of the lower interest rate saving,” he cautions.

“Consumers also need to be careful not to finance certain items over the full 20 year period of the loan. For example, the repayments on a car only last for a maximum of five years so the consumer needs to ensure that he pays this money back into his home loan account within the same period of time by increasing his monthly repayments accordingly.”

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

Banks lent even less money to people wanting to buy a home in February and statistics show that mortgage advances declined from 3,8% in January to just 3,4% in February according to data released by the South African Reserve Bank.

Outstanding mortgage balances in the household sector increased by 4,1% year-on-year in February after rising 4,6% in January. On a monthly basis, household mortgage balances were up by R2,8-billion in February compared with the previous month.

According to Jacques du Toit, senior property analyst at Absa Home Loans, the declining trend in mortgage advances is believed to be related to various factors including the ratio of household debt to disposable income that was at 77,6% at the end of last year.

“The percentage of credit-active consumers with impaired credit ratings remained high at 46,5%, in the final quarter of 2010 and this situation impacts on the consumers’ ability to take up credit against the background of the National Credit Act. Moreover, the banks’ lending criteria remained strict,” says Du Toit.

He says that significant increases in the fuel price and rising food inflation are also having an impact on consumers emphasised by the fact that consumer confidence had fallen in the first quarter of this year.

Total mortgage advance reach R1 047,6-billion in February this year, while mortgage advances to households at the end of February were at R764,2-billion equivalent to 73% of the total.

Du Toit says that mortgage advances growth is forecast to remain in single digits for the rest of this year.

“The cost of servicing household mortgage debt as a percentage of disposable income was around 4,3% in the last quarter of 2010. This was the net result of trends in growth of household mortgage debt – that increased by 0,9% during the period – and a lower mortgage interest rate,” says Du Toit.

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