Making your Home Loan work for you

A home is a serious investment and, like all investments, it needs to be managed properly in order to ensure that you get the best possible return. But few people, once they’ve had their home loan registered and start repaying the loan, give their most important investment another moments thought. Yet there are a number of important steps that a homeowner can take to ensure that their hard-earned money is being put to good use:

Increase your home loan repayment:

When you borrow money “Home Loan” to purchase a home you are in effect taking out two loans. The first loan is to repay the capital amount (known as the principal sum) and the second loan is to repay the interest charged over the period of the loan. The majority of the money you repay in the first years of having a home loan goes towards paying back this interest, which will only marginally reduce the principal sum.

In South Africa, interest is generally calculated daily on your mortgage. In effect, this means that the amount you owe the bank increases every day. Because of the nature of compound interest, regular additional repayments made at the beginning of your loan term will have a much greater effect on the cost of your home loan than if you start paying extra cash into your home loan account five or ten years down the line. However, even if you are already a number of years into your loan term, you can still make a considerable saving by paying additional money into your home loan. By increasing your monthly instalments, you’ll reduce the term of your home loan, which means that you won’t be paying heavy home loan instalments in later years. The result is that you will have paid less money in interest over the term of the home loan.

There are a number of easy ways that you can put additional money into your home loan without really feeling the difference in your pocket:

• Put the additional income you receive from your annual salary increase into your home loan
• When interest rates decrease contact your lender “ Banks Home Loan Department” and ask them to maintain the instalment that you were paying prior to the drop on lending rates
• Put a portion of your annual bonus into your home loan, you may put extra money into your home loan anytime you want to. Every little bit helps. Making a prepayment ‘ Home Loan Deposit’ when the loan registers is particularly helpful, as you will reduce the capital amount immediately, significantly reducing the total interest payable over the term of the loan.

Use your home loan as an interest – bearing savings account:

Banks are in business to make profit so it makes sense that they charge a higher interest rate to people borrowing money from them than they do to investors who deposit funds with them. For example you might be receiving 2% interest on a positive balance for money in your savings account, but are probably being charged a much higher rate for the money you’ve borrowed to pay off your home loan.

By depositing your savings into your home loan, you are in effect receiving the interest rate that the bank charges you on your loan as positive interest on the money you invest For example, if you have a home loan for R1 million, and you deposit an extra R100 000 into your home loan, you are now no longer being charged interest on R1 million, but rather on R900 000. The money you save in interest over the time that you keep the R100 000 in your home loan is the positive interest you are in effect receiving on the money you’ve deposited. Plus you can withdraw this cash when you need it without being penalised ‘Banks Terms and Conditions Applies’

For further information contact Morne Prinsloo on 011 327 4489 or email morne@mortgagepluscc.co.za

If you would like to know more about your home loan services and mortgage requirements please phone the Mortgage Plus Head Office on:

Attached please find the Home Loan Application Form * - Short Home Loan Application Form

0861.11.11.93

info@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Mortgage Plus have created a series of Questions and Answers about Originating, Home Loan Products, finance and more!

What Is Bond Origination?

Bond originators give you independent advice on choosing a home loan and help you obtain it without the hassle of doing all the legwork yourself – we answer some commonly asked questions.

What is mortgage origination?

Basically, it is the business of negotiating on the behalf of a prospective property owner, a home loan with a bank.

Why do I need a mortgage originator?

Because your home purchase is probably the most expensive one you’ll make in your life, the home loan itself is an im portant financial decision and the benefit to be gained from making a correct choice can amount to savings of hundreds of thousands of rands over the life of the loan.

Is choosing a home loan really that difficult?

All home loans differ from one another and each bank may evaluate your worth differently, so it is not as simple as shopping around for what appears to be the best interest rate in the market. Each bank has varying credit policies that cater for different claim circumstances. Mortgage Plus has knowledge of all banks’ products and will advise you on the type of loan that best suits you. They will negotiate with the banks on your behalf to get the best rate for that product.

I’ve heard that this service is free – how so?

Indeed, the service is free for the home buyer. Mortgage Plus receives a fee from the bank for doing the groundwork on the loan and thereby reducing the bank’s costs. The bank is, by law, not allowed to add this cost to the amount of the loan, so you won’t pay more than if you approached the bank yourself.

Isn’t it easier to just get my home loan from my regular bank?

Your bank will encourage you to keep all your finances under one roof, so to speak – but at what cost? Because Mortgage Plus originates loans for all major banks, this offers you, the buyer choice and by being able to compare various products and rate offers, you get the best home loan deal in the end.

How do I know if I’m getting good advice?

The professionalism of the originator will quickly become evident, so make sure you are dealing with someone who can explain their recommendation clearly and are credible. Check their track record and only deal with an originator that is a member of the National Association of Mortgage Originators (NAMO).

Must I accept any of the packages they offer?

No – you have not entered into an agreement with the originator, other than to give them the information they need to get quotations from the banks. You still make the final decision whether or not to accept their offer.
Once I’ve accepted their recommendation, what happens?
Mortgage Plus will submit your applications together with the relevant documentation, such as copies of your ID and salary advice, to the bank agreed on and advise you once your loan has been approved. A good originator should also keep you informed all the way through to registration and liaise with the conveyancing attorney on the loan’s progress.

Types of Home Loans

The leading banks usually offer the types of home loans listed below. These types of home loans are also used in the case when you have an existing home loan and need additional funds. Read more about Further Loans.
Your Mortgage Plus consultant will help you choose the option that best suits your needs and help you through the application process.

Variable Rate Home Loan

With a variable rate home loan, your interest rate is linked to the base home loan rate which moves up and down depending on market conditions. If the base rate decreases by one percent, so will your interest rate, and of course if the base rate increases so does your home loan rate.

Fixed Rate Home Loan

Here your interest rate is fixed for a specified period, normally between one and two years. Generally the fixed interest rate will be slightly higher than the base home loan rate when the loan is taken out. A fixed rate loan protects you from rising interest rates and gives you the certainty of knowing exactly what your payments will be. However it does not allow you to benefit from any decreases in the interest rate over the fixed period.

Capped Rate Home Loan

This type of home loan allows you to benefit from any decrease in interest rates, but has a maximum rate built in so you never pay more than the capped rate. These loans are not always available from banks, and generally the qualifying criteria are more stringent.

Remember by choosing us for a loan, you will get professional advice to make sure you are getting the best deal possible.

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

www.mortgagepluscc.co.za