Home Loans – Frequently Asked Questions

What is a Home Loan?

It is the funds a buyer has to borrow (usually from a bank or other financial institution) to purchase a property, generally secured by a registered mortgage to the bank over the property being purchased. A home loan requires you to pledge your home as the lender’s security for repayment of your loan. The lender agrees to hold the title or deed to your property until you have paid back your loan plus interest.

How long does it take for the property to be registered?

Depending on the transferring attorney the registration process will take about four to six weeks. If it is an additional home loan on a property you already own registration should be quicker.

What happens to the title deed after its registered?

The bank holds your title as collateral for as long as the home loan is operative and the title deed will only be returned to you once the home loan is fully paid.

Is it necessary to read through the entire home loan document?

You can rely on the bank’s attorney to guide you through all the home loan documentation but you will need to acquaint yourself with the content of the documentation because, as far as the law is concerned, ignorance is no excuse.

When will my first home loan instalment be deducted?

The first payment on your home loan usually will be deducted on the first day of the month following the month of registration. When signing your bond documents the bank’s attorney should be able to tell you when the first payment will be debited from your account.

Do I need life assurance before I can get a home loan?

This will be required if ceding the life policy for the value of the home loan is a condition for granting the home loan. You are not obliged to use the bank’s insurance company but you can use another insurance company or cede an existing policy of your own.

Do I have to use a debit order to pay the monthly instalments on my home loan?

The banks will most likely include the signing of a debit order as a condition of the home loan as the bank will then be sure that they will be paid each month. The bank will usually allow you to choose the day of the month that you want the payments to be deducted from your account.

How is the bond attorney selected?

The major banks all have a panel of attorneys in each town from which they randomly select an attorney to register the bond. Usually the banks transferring attorneys will also be used for bond registrations.

To whom is my deposit paid?

Depending on the stipulation in the contract, the deposit is either paid over to the Estate Agency or the Transferring Attorneys as they both have trust accounts where your money is protected. Never pay the deposit directly to the seller or the individual agent and always insist on the relevant receipts.

How long will the transfer take to register?

This usually takes about three months from the date of sale, depending on the circumstances and due dates for the home loan grant stipulated in the deed of sale. Registration can be completed within 6 weeks to 2 months from the date of sale if there are no complications or delays from any parties involved in the deal.

What is the cost of transfer and home loan registration?

There are schedules of transfer and home loan registration costs available from both estate agents and conveyancing attorneys. Transfer costs are based on the value of the property and whether you are buying as a natural person or legal entity such as a Trust, close corporation or company. Home loan registration costs are based on the total registered value of the loan.

When must my transfer costs be paid?

Transfer duty has to be paid in advance and is usually due a few weeks after the date of sale. Any delay in making this payment will unnecessarily delay the transfer.

Who will register the home loan?

All the banks have panels of conveyancers that they use for home loan registration and one of these will be instructed to register your home loan. Your mortgage broker at Mortgage Plus will have special rates with various attorneys on the banks’ panels and it is advisable to use one of those. Furthermore, if the transfer conveyancer is also on the bank’s registration panel it will be expedient to let them do the registration as well.

Who will contact me on registration?

Your conveyancer’s secretary should contact you on registration and provide you with a final statement of account. Your estate agent may also confirm registration. Finally, your bank will send you a letter advising you of the registration of the home loan and the date when your first instalment is payable.

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

Many home loan middlemen are keen to help you choose. Mortgage Plus investigate:

There’s a new finger in the pie. He is the mortgage broker, what you might call a loan ranger. In recent months more than one mortgage broking business has suddenly appeared, bringing a new dimension to home loan business in South Africa. Until now estate agents have usually played the part of middlemen between banks and the general public. Unless the buyer has insisted on using his own bank, the agent will introduce him to a bank of his own choice and receive a nominal 0.5% commission for his influence. The practice has always been regarded as eminently fair as the commission has been lawfully earned and virtually any bank will pay it to him, ruling out price-war competitiveness or forced marketing influences.

The Loan Ranger – the New Middleman

Is there really a need for another middleman? Has the role of the individual estate agent come to an end? It all depends on how mortgage broking will actually be conducted. There could be great benefits if the practice results in new home buyers having a direct link to all banks through brokers acting principally in the interests of the individual as happens in countries like the United Kingdom and Australia. There established businesses advertise directly to the public, offering them the service of a wide knowledge of each particular bank’s products. The client has a freedom of choice after being advised of the various options to decide which product and bank to eventually utilize. Laws have been passed ensuring transparency in each broking business including an obligation to always disclose the financial benefit the broker expects to receive. In short,all mortgage brokers in South Africa and these other countries are accountable at law to the public for their activities.

We are seeing the beginning of what is likely to become a permanent feature of local home loan business practice. Already, however, there are signs that government intervention may be necessary if local mortgage broking is to become the healthy institution it is elsewhere in the world. Similar laws will have to be passed to regulate the conduct of brokers to prevent unhealthy elements creeping in which are not going to be in the interests of the general public.

Features of New South African Mortgage Broking

The new brokers operating locally belong to two different types. The first follows the universal practice of public advertising seeking to canvass potential clients directly for their bond business. You can find their services easily on the Internet and they are very clearly projected. Potential customers are encouraged to enter into a deal with the broking agency which places very few restrictions on them. The actual agreements read more like an information chart of how they work rather than a contract binding the client to their services. In fact no commitment comes until the client agrees to the terms and conditions of the financial institution granting him the loan. The broker undertakes to obtain offers from each of its participating banks within 48 hours and, once the client has accepted one of them, it will arrange a meeting with the relevant staff of the bank to process the loan application.

If they follow the universal practice these brokers will disclose their financial reward for their services, namely 0.35% of the total amount of the loan finally granted. They should not restrict their clients from canvassing other banks at the same time. Are there any drawbacks? The obvious weakness is if your mortgage application is only restricted to a few banks. As a client, you should insist that all banks receive your loan application-or be given the reasons why some are excluded.

Forced Marketing – the Other Type of Mortgage Broking

Then there is the second type – mortgage brokers intervening between banks and estate agencies to ensure business is directed to banks of their choice. Here, however, the involvement is not as transparent as it should be. These new loan rangers generally transact their business without visibility to the buyer who may be totally unaware of their presence or interest. They do not generally advertise to the public at large but conclude private deals on their own terms. They canvass principals of large estate agencies, negotiating deals whereby all the agency’s business is to go to them and through their influence to specific banks. Here the home loan application will not necessarily be directed to the bank offering the best product but the one prepared to pay the biggest bucks. Cases are already known of banks being prepared to offer up – to 1 % commission to these mortgage brokers for bond business. That’s quite – a whack! On a loan of R500 000,00 the bank will be prepared to pay out no ‘- less than R5000,00 for its A new business!

This practice is detrimental to good personal business relationships. The fresh air of healthy A competitiveness gives I way to the polluted atmosphere of forced marketing. Individual l agents working for I these agencies are I deprived of any right to influence the ultimate direction of the loan – application. Their recommendation comes no longer from personal experience of the banks offering the best products and after-sales service but from compulsion to use the institutions offering the highest commission.

Which Bank – The One with the Best Product or Biggest Commission?

As you can see many agencies will, in future, be selling their home loan influence to the highest bidders. You can be sure those bidders may well be banks that cannot rely exclusively on the quality of their service and products to net them their business. You will do yourself a huge favour by asking your agent whether his or her agency has an agreement with a mortgage broking agency through which it earns substantial commissions for using specific banks.

Today home loan consultants employed by banks are generally more trained, visible and available than they were before. Services and skills have been sharpened. Commission, however, is another matter entirely. They spoil healthy competitiveness. Banks which attract business through extravagant commission payments are forcing the market against the more acceptable face of mortgage broking – transparent dealings with the public where individuals have complete freedom to consider a wide range of mortgage packages with the broker earning a reasonable commission (up to 0.5%) for his services.

The Estate Agents’ Code of Conduct

All estate agents are bound by the Code of Conduct issued by the Estate Agency Affairs Board. In its October 1999 issue of its regular publication “Agent” the Board has given a reminder to all agencies of their responsibilities to the public in a short article headed Mortgage Broking. Agents may not deliberately“steer” buyers to financial institutions of their own choice through any improper influence. No agent may recommend one bank’s products or services over another purely to earn a commission. Payments of commissions to agents in the traditional manner have again been endorsed as perfectly fair. No obligation rests on the agent to disclose to the buyer that he will be I remunerated for directing bond business a certain way but no undue influence may be used to achieve this end. The agent’s role, first and foremost, is to offer advice on the best services available and to allow each buyer plenty of room to compare the various packages offered by the different banks.

Directing home loan applications to specific banks through mortgage broking agencies purely because of a private deal guaranteeing high commission payments would appear to be the very thing the Code of Conduct defines as unprofessional conduct.

Clients, Customers and Professional Service

What can you do to avoid becoming a victim of forced marketing? You will need to maintain a lookout for loan sharks lurking in the shadows. Conduct your business directly with a fully accredited home loan advisor or Bond Originator for example Morne Prinsloo at Mortgage Plus cc. Getting to know them personally paves the way for a long-term harmonious relationship.

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