When you purchase a home, there is always mortgage attached to it. It is the mortgage that actually pays off the house, and it is the mortgage that you are paying for in actuality and not the home you are living in.

Of course, if you are unable to pay off your mortgage, then you can be sure your house will be foreclosed by your mortgagor and be sold off to regain the money they spent in buying the house for you. Most mortgages run for a very long time and can be very critical to one’s financial well-being.

For one, mortgages take so long a time that the owners of home are also forced to limit their expenses as well as their leisure just to make sure that they meet their monthly payments. That can be good, but for a prolonged period of time, it does take a toll on every person. No one deserves to be denied of their hard-earned earnings that way, with some having only enough left to satisfy the cost of living. There should be a way for someone to finish his mortgage payments earlier.

Refinance Your Debt

Most mortgages run for terms as long as twenty to thirty years, with very high interest rates as well. Life can be hell for the mortgagee for that span of time, and twenty years is a very long time at the least.

Nowadays, however, newer mortgages can be had for lower interest rates as well as shorter time periods. You can do that through mortgage refinancing.

Mortgage refinancing is merely restructuring your debt in order to attain shorter time or lower interest rates. Lower interest rates are now possible because of tight economical conditions as a result of the mortgage crisis and also because creditors are so many that the competition has become tight. If you have signed up for a very long mortgage period and has spent some years paying off your house, you might as well start thinking about refinancing your mortgage.

What Happens When You Refinance?

Once you tap the services of a mortgage refinancing firm, your new mortgagor will then pay off your existing mortgage with a new note. This means that, in the eyes of your old lender, you have paid off your mortgage.

However, you now owe your new mortgagor money. The new mortgage will be according to terms of your own choosing, so if you have experienced an increase in income and are confident of higher terms, then you may want to start thinking about refinancing your current mortgage. If you are enjoying increased disposable money due to increases in income, why not use them to shorten your mortgage terms and be debt-free?

Another one of the effects that you will experience with mortgage refinancing is improved credit score over the next few years. In addition, you get to shorten the payment period and thus pay off your house quicker than you would have with your terms of your old loan.

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

Johannesburg – There are subtle hints that the interest rate cut party may be over.

For one, central bank chief and monetary decision-maker Gill Marcus says so.

She recently warned that interest rates will probably remain unchanged for some time.

Interest rates are currently at the lowest levels in almost 30 years and many economists think the next move will be higher.

Although inflation moved back into the desired target range, inflationary pressures remain in the medium term, most notably the cost of energy – which would include electricity tariff hikes and fuel price increases, said Anton Gildenhuys, CEO of Sanlam Personal Finance.

“Consumers should not get too used to paying these lower rates because the direction is bound to change and the rates will start to go up. I estimate this shift could happen within the next 12 to 18 months.”

The prospect of higher rates may tempt many home owners to .

Most banks offer you the chance to keep your rate unchanged for a specified period (usually between one to 10 years). This means that when rates go up, you won’t be affected.

There is usually no cost involved, but you will pay a penalty fee if you want to get out of the fixed interest rate agreement early. Depending on the bank, the penalty can be a percentage of the outstanding balance or an amount equal to a couple of months’ interest.               

With First National Bank, for example, if you cancel the fixed rate agreement three months before the end of the contract – and you have an outstanding balance of R500 000, with a fixed interest rate of 12% – you will pay a penalty of R14 723.

After the fixed rate term, your interest rate will revert to the variable interest rate, unless you opt to renew the fixed agreement.

If you sell the property, or want to pay off the bond, you will need to give 90 days’ written notice – otherwise the bank will charge you an extra interest amount.

Apart from benefiting when rates go up, fixing your home loan rate can bring peace of mind.

You know exactly how much you will have to pay for a certain period, making it easier to budget. If you have a limited or fixed income, you won’t have to worry about the chance that rates will shoot through the roof, which may mean you will lose your house.

But there’s a catch.

The rate at which your home loan will be fixed will be higher than what you pay currently. The rate will depend on how long you want to fix it for, the size of your loan and the size of the loan relative to the value of the property.

Careful – you could end up paying more

The current prime rate is 10%, while Absa, for example is offering fixed rates of 10.50% (one year), 11.10% (two years)  to 14.50% (10 years).

If you just took out a home loan of R1m, and you pay the prime rate of 10%, you will pay R115 800 over the next year. If you decided to fix it for the next year on 10.50%, you will pay R4 000 more.

Currently rates offered by banks to fix rates over five or 10 years in particular are quite expensive, said Gildenhuys.

To fix rates for five years on a R500 000 loan and if the size of the loan relative to the value of the property is below 80%, you can expect to pay an fixed rate of about 12.9% per year. 

“Assuming that you currently pay prime, interest rates will need to increase by 3% or more before you will start to benefit,” says Gildenhuys.

“For you to benefit over the term that you fix rates, the prime interest rate will need to increase beyond the fixed rate within the next two years or so, otherwise you will still lose out over the total term of five years.”

And then there’s the risk that interest rates won’t budge – and may even come down.

Nedbank – although it is in the minority – believes that a fragile economic recovery, together with a decline in inflation and inflationary expectations, could strengthen the case for another cut in the third quarter.

You should only consider fixing your rates now if accurate budgeting for your mortgage payments over the next few years is absolutely essential, said Gildenhuys.

“Otherwise it is quite likely to be better for you to increase your repayments now to where a fixed rate repayment would be, thereby reducing your loan much more quickly, and creating some buffer for yourself should conditions worsen materially.”- Fin24

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

Lenders will take the following into account with every mortgage application.

INCOME

When applying for a mortgage, lenders will look at your total income before any deductions (gross income) to access if you would be able to afford the mortgage payments. Lenders will consider the following as income:

-Salaries & Wages
-Regular Incentives
-Investment Income
-Retirement Income
-Regular Commissions
-Rental Income

CREDIT HISTORY

To qualify for a mortgage it is vital that you a satisfactory record of paying all your accounts on time. This can affect your credit score substantially. A credit score is a summary of a number of positive and negative factors, such as the information on your credit report that aims to predict how likely you are to honor your credit commitments in future. This rating is often used by lenders to identify the risk in offering you credit.

If you experienced problems in the past, and if you have a good explanation it can be taken into account. Make use of an experienced mortgage broker to assist you when applying for a mortgage.

TOTAL DEBT

The amount of debt you have will play a significant role in qualifying for a mortgage. Most South Africans have debt in the form credit cards, store cards, personal loans etc. As a rule of thumb lenders require that the total off all your monthly debt payments may not exceed 80%-85% (depending on the lender) of your nett income.

MORTGAGE QUALIFICATION CRITERIA

Before the introduction of the New Credit Act (NCA) lenders used the 30% rule as qualifying criteria. Now, after implementation on 1 June 2007, you have to qualify on affordability. In other words, they will look at your NETT salary, and deduct all your monthly expenses to ensure you can still afford this amount.

If you already own property and would like to apply for additional finance on your home loan, the same rule applies. One advantage, though, is if you will be consolidating debt, because some banks will take into account the debt you will be settling and looking at your improved cash flow when calculating your affordability.

PROPERTY VALUATION

Your lender will do a valuation on the home to determine its value, before granting a mortgage.

The value of the property must be in line with the purchase price. If this is not the case, the bank may approve a lower bond amount.

If you’re already own property and would like to apply for additional finance on your home loan, you need to have sufficient equity in the property to qualify. Equity is calculated by taking the market value of the property and deducting what you owe. This difference is the equity. In certain suburbs the banks will allow you to apply up to the full value of the property.

To apply for a loan you will have to fill out a short application form. You will then receive a FREE quote from well established, nationally recognized lenders. You do not need to decide now whether the loan is for you.

Just apply and compare the repayments to your current situation. There is no obligation on your part. If you decide that it is not for you, you simply do not have to accept the offer. You have nothing to lose and everything to gain.

Click Here – to get your free Quote!