What Every First Time Homeowner Should Know About Home Loans in South Africa

For many first time homeowners, finding a property that meets your needs is something that may take months to achieve. Whether you are searching for a compact family home that offers the perfect place for your children to grow up in, or a new apartment in the city, the search for a property that is in the right area, at the right price, with the right

features is no easy task. In the same way, finding the right partner for home loans in South Africa should also not be something that is done in haste.

Choosing a home financing provider without understanding exactly how the process works can cost you a fortune in hidden fees, high interest rate and unrealistic payment terms. Instead, take the time to find a financing partner who understands your specific needs, who will be able to work with you each step of the way as your financing needs change.

Some of the factors regarding home loans within South Africa include:

• Interest rates – these will change over time, but to begin with you should be getting a competitive interest rate that will not break the bank. Fixed interest rates are set at the same amount over time, while variable interest rates change as your financial needs change.
• Payment terms – depending on your budget and needs, payment terms can be selected over anything from ten to 20 years. This will allow you to afford your new home without falling into serious debt, with payment plans spread out over time to ensure that you can easily make your monthly payments.
• Loan qualification – you will qualify for different sized home loans depending on your income. Couples are able to combine income, while singles have a sole income that may affect whether they qualify for a larger loan. In this way, your financial needs are carefully considered to ensure that you do not risk serious debt.
• Additional costs – it is always a good idea to find out exactly what costs you may incur for your home loan. Some providers charge an early payment penalty for homeowners who pay off their loans before the prescribed date. Others may charge late payment penalties too. Don’t be afraid to ask about all potential costs before choosing your home financing partner.

Best Tips for First Time Buyer Home Loans

While it can be a hugely stressful step to purchase your first home, do not let the daunting process deter you from achieving your dreams of home ownership. To be prepared, make sure that you have all documentation ready so that you will be able to begin the process as soon as you have found your ideal homeloan partner. Set a budget, and do not be tempted to purchase property that is not within your budget – the most effective way to ensure that you are able to finance your home is to choose property that you can realistically afford to purchase. – affordability-calculator

Mortgage Plus Home Loans makes the process as pain-free and simple, with a wide range of loan plans that suit every budget and specific needs. This allows you to focus on the excitement of finding your dream home, along with all the plans that you have to make it your own.

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

Growing availability of credit may help the residential housing market to regain some momentum from mid-year, but affordability and lack of confidence remain the two major stumbling blocks.

In spite of increased sales, improved buyer activity and further relaxed credit criteria by the banks, the residential property market still has one major hang-up — house prices remain in limbo, with very little exception. After peaking around April last year, deceleration followed and, according to the latest Rode’s Report, prices in January, on a national basis, were down by roughly one percent on the same month a year earlier.

The reasons are fairly straight forward; lack of confidence, job insecurity, fears of upward pressure on household expenses and the threat of higher interest rates. Hardly an environment for a major capital investment…

We have had a minor recovery in the market over the first five months of this year, but it has been too mild to make a significant impact on house price growth.

Buyers with cash and access to funds are active, looking for bargains. The May First National Bank House Price Index reveals a very slight acceleration in price growth from 1.2 percent year-on-year in February to 2.1 percent in May. But if one adjusts this average house price index with the consumer price index (CPI) real house price growth is around -2.5 percent. But again, this is a national average — there are pockets of sunshine amidst the gloom. Some industry analysts suggest that the negative growth trend will reverse shortly after mid-year.

It is a classic case of supply exceeding demand and the mini-recovery may well have a lot to do with the enjoyable summer months. The benefits emanating from the interest rate cuts since mid-2008 have waned and First National Bank’s property strategist John Loos warns: “This reflects the very weak financial and debt position of the household sector following the 2008/09 recession. If the residential market cannot achieve respectable house price growth after such a huge interest rate stimulus a period of house price decline would be the likely outcome of a possible phase of interest rate hiking or of slowing economic growth, or both.”

Fortunately, the outlook for economic growth looks brighter following recent indicators. First quarter GDP figures show a marked improvement in annualised growth to 4.8 percent, which is well ahead of the general expectation. The big question now is whether this growth can be maintained. The first quarter figures are worth analysing; the trade sectors showed positive growth, led by retail and finance and business services. Underperformance came from agriculture, construction and mining, while manufacturing produced an excellent performance, the latter being boosted by basic iron and steel as well as oil refining.

Business indicators tend to correlate well with residential property demand, so the upside in GDP is positive for the market.

Increased willingness by the mortgage bankers to lend should help the market in coming months. According to Saul Geffen, there has been a significant relaxation in deposit requirements, which opens up a much broader homebuyer base.

Other positive news is that the banks’ initial decline ratio is 8.7 percent lower year-on-year at 45.4 percent, while the effective approval ratio has increased significantly from 57.3 percent in April last year to 64.4 percent.

Geffen says that strong April approval rates build on recent record numbers recorded in March, when approval figure was the highest value of approved home loans since October 2008.

According to Standard Bank, mortgages with values between R350 000 and R700 000 comprise the largest share of the market. On the other hand, the bank states: “The proportion of mortgage loans granted attributable to the highest category of income earners recorded the highest annualised growth rate of any income category. In addition, the average size of mortgage loans applied for has seen a steady increase.”

Another indicator is our currency. The strong rand has its detractors, especially those in the export sector. But if the rand wasn’t strong, the effect of oil now hovering around US$107 per barrel would be severe. So despite some rise in inflation it is far from a foregone conclusion that interest rate hiking will take place this year.

Another positive indicator, closer to the residential property market, is the growth in private sector credit extension (PSCE) in the first four months of the year. The two biggest components, mortgage advances and other loans and advances (corporate credit demand), continue to drive overall growth. Instalments sales also rose in spite of the plethora of public holidays. Total credit extended to households remained at a relatively healthy pace.

At present we are just hanging in…

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