Question and Answers regarding Home Loans in SA

Q: I am in the process of buying a home and require a bond. My first thought was to apply directly with my bank, however a friend told me about something called Mortgage Origination. What is Mortgage Origination and why do I need a mortgage originator?

A: Mortgage origination is the business of negotiating a home loan with a bank on behalf of a prospective property owner. Mortgage originators give you independent advice on choosing a home loan and help you obtain it without the hassle of doing all the legwork yourself. Some originators, like Mortgage Plus, offer services that may help a buyer, like advice on estate agents in the area, how to complete the sale agreement, etc.

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

Q: I am confused. What is a Variable Rate Loan vs. a Fixed Rate loan?

A: With a variable rate 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.

With a Fixed Rate Loan however, your interest rate is fixed for a specified period, generally between one and two years and is generally 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. Bear in mind however that it does not allow you to benefit from any decreases in the interest rate over the fixed period.

Q: My husband and I are expecting our third child so we are in the market to buy a new, bigger home but with the current interest rates and uncertainty in the property market at the moment, we really need sound advice on whether to buy a new home, build from scratch or renovate our existing home.

A: Whether you are buying an existing home, building a new one or renovating your current abode, taking the first steps towards home ownership is a daunting prospect. Take heart – no matter how intimidating that mountain may appear, scaling it will always be easier with sound advice.

Property’s primary law is position – the area in which the home is located and the market value of the homes within that suburb. Discussing the prospects with family and friends around the braai or the dinner table provides a valuable perspective on the intangible elements of local amenities, community living or double-storey homes when there is a new baby in the crib.

Building and renovating carries the guiding principle – do not over-capitalise the property relative to the neighbours. Simply put: building or extending the property into a five-bedroom mansion with an Olympic-size swimming pool in an area where the bulk of properties have three bedrooms on small plots is not economically sensible.

Conversely, renovating the smallest property in a prime area promises a long-term return that more than compensates for the renovation costs. Essentially, bathrooms and kitchens sell properties so upgrading those assets substantially improves the home value.

There is no substitute for professional advice. Mortgage Plus  is one of the country’s top mortgage originators and offers free advice to home owners and buyers. Whether buying, renovating or building, our consultants can guide you through the process step-by-step, complete the paperwork and arrange and negotiate with the banks a finance package to suit your individual needs.

By choosing Mortgage Plus 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

Buying Your First Home: Everything You Need to Know Before Taking the Leap

Buying your first home can be a daunting experience; with all the hype in the news about high interest rates, repossessed homes, and the near impossibility of obtaining a home loan most people are running, sprinting, towards renting a home instead of running the risks of buying one.

But even with all the negative press about the current state of the property market there is no better feeling than owning your own home. And with interest rates about to drop there is no time like the present to take the plunge. Here is everything you need to know before buying your first home …

Be Pre-approved:Nothing beats the piece-of-mind of shopping with a pre-approved bond. Arranging a pre-approved bond will minimise stress when shopping for your new home; knowing what you can afford will allow you to narrow down the search and save you the time of looking at things you can’t afford and that aren’t suitable. www.mortgagepluscc.co.za

Plan Ahead for Success:

 Before setting out to buy a home, it pays to think about your needs. Often one may fall in love with “the perfect house” only to find that the home is not in the right area or that the garden is too big to manage. If the home is for a family, the needs of the whole family must be considered – husband, wife, children, and sometimes even grandparents. Think about how many bedrooms and what size kitchen is needed; and whether having a garage is important. Do you have a dog and need the property to be fully fenced?

Very few people have the money to buy exactly what they want, so make a list of your requirements and break it down into “must have” and “like to have”. It will help you when you start looking at homes. Then think about the area where you want to live – is it quick and easy to get to work? Are there schools and shops nearby?

Monthly expenses need to be carefully budgeted before you even start looking. Owning a home not only means paying a monthly bond installment but has many new bills too. Make a list of everything you’ll have to pay – bond instalment, rates or levies, house insurance, mortgage (bond) protection insurance, electricity and water, repairs and maintenance; and make sure your budget can afford everything you have listed.

Know your Agents:

Get to know the agents in the areas you are searching in and inform them about what you are looking for and your price range. They will be able to notify you when new properties come on the market and can provide a tailor-made service to suit your needs.
Putting in an Offer to Purchase

Once you have seen a property you like, the estate agent will help you draw up an “Offer to Purchase”. This document contains all the terms and conditions of the sale, the purchase price, the payment terms, the date you will take occupation of the property, and the occupational rent.

Occupational rent is a monthly amount paid to the seller by the purchaser to occupy the property prior to the date of registration of transfer of the property into the name of the purchaser. Alternatively occupational rent could be paid by the seller to the purchaser if he/she needs to continue occupying the property for a period after registration of transfer.

If you plan to take out a home loan, the “Offer to Purchase” must include a condition that the sale is subject to bond approval being obtained within a realistic amount of time — i.e. 7 – 10 working days. Once you have confirmation that your loan has been approved, you must notify the estate agent immediately to ensure that your offer becomes unconditional and to enable the process to continue.

This condition is very important, because if you are not able to secure finance, the “Offer to Purchase” will terminate and become null in void, and neither you nor the buyer will be liable to pay any costs or penalties.

The Offer to Purchase should also include details of any unusual fixtures or fittings which are included in the purchase price, or which the seller might want to take with him when he leaves. Generally all items which are “fixed” remain in the house, but furniture, loose carpets and appliances go with the seller. This is where conflicts often arise, so it’s best to ensure any important items are noted in the contract.

Take the time to find out everything you need to know about a property before signing anything. Visit the house for a second look – you may have missed something the first time. Always express your concerns to the estate agent and ask them to assist you in clarifying any problem areas that you may have or consult an Attorney. Once the seller has accepted and signed the offer, it becomes a contract binding on both parties. However, if the purchase price is R250 000 or less, the buyer has the right to cancel the offer within 5 days of signing the Offer to Purchase. This must be confirmed by the buyer giving written notice to the seller and the sellers’ agent within those 5 days.

Applying for a loan:

As a first time home buyer there are a number of special criteria which you’ll need to fulfill in order to qualify for a home loan.
One of the most important factors to consider is what size bond you can qualify for; often this is about 25-30 percent of your salary, however if you and your partner apply for the loan jointly you may be approved for a larger loan amount.

Upon the application for your home loan the bank will consider the Loan-to-Value ratio (LTV) , which is the ratio between the home loan amount you are applying for and the value of your property. This is an important factor as the LTV percentage forms part of the interest rate calculation on your loan amount.

The maximum loan term offered by all banks is twenty years, and some banks require a life policy to be ceded to them. It is important to clarify this with your bank immediately.

 The general requirements of applying for your first home loan are the basic details of your monthly salary, your credit history and the offer to purchase.

The following criteria will need to be passed to qualify for a home loan;

- You must be 21 years or older
- Proof of six months of permanent employment or at least two years of self-employment,
- Minimum salary requirements can vary between R8 000 and R10 000 per month joint or single income.
- You’ll need to have a credit clear history – i.e. no judgments or defaults.
- Some banks may require SA citizenship.

Also Make sure you have all the following documents available.

- Copy of ID
- 3 months bank statements.
- Offer to purchase, which is the written agreement between the seller and the buyer on the purchase price of the property. Sectional Titles must submit most recent body corporation financials.
- Most recent pay slip, commission earners will need to submit 6months pay slips.

- If you’re a self employed business owner:
- 6 months business accounts statements
- 6 months personal bank statements
- a letter from auditor or accountant stating monthly income.

Taking Ownership of Your New Home:

Once all the conditions of the contract have been met and the deposit paid, the next process is the transfer of the property into your name and the registration of the Mortgage Bond at the Deeds Office. The Conveyancing Attorneys handle this part of the loan process and will contact you when the documents are ready to be signed.

The seller will also have to provide you with an Electrical Clearance Certificate, as well as a document stating that the property is pest-free. These conditions may vary depending on which province your property is situated in.

The registration and transfer process normally takes between 8-10 weeks if there are no unexpected delays.

The day the transfer is registered in the Deeds Office is the day you become the legal owner of the property. Your lender will start the insurance policy and begin charging interest on the loan and will inform you when the first instalment becomes payable. From this date onwards you are also responsible for paying rates and levies — or earlier, depending on conditions of sale agreement.

Once everything is finalised:Once all the Is are doted and the Ts crossed you can finally enjoy your home. Transform your new house into a home by personalising your space. Focus on making your home a comfortable space where you can unwind and have fun; after all you will be sacrificing a large portion of your income to stay there.

And don’t forget to think long-term; boost your future re-sale value by ensuring that you keep your home updated and looking good. Budgeting for routine maintenance and unforeseen emergencies will ensure your home stays looking as, if not more, beautiful than when you bought it.

Words by: Crystal Espin

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

Smart Bond is a housing finance solution for applicants earning a monthly household income of R15 000 and below. With Smart Bond, approved customers are able to enjoy 100% bond finance, i.e. there is no deposit required.

More about: Smart Bond Overview

Why do I need this?

What can I do with this?

What will it cost?

Do I qualify?

To qualify for Smart Bond, the following is required:

• You need to be a South African citizen, formally or self-employed
• Your salary/income must be paid into a bank account
• You must not have had judgments and/or defaults of more than R1 000 against you in the last 12 months
• The property you intend to buy must be acceptable for lending purposes
• Your bond instalments must be paid via a debit order or payroll deduction facility

You should still be able to afford your bond instalments, including the following:

• Current expenses and other monthly debt instalments
• The new expenses relating to the new home you are buying

You can get this at:

• MORTGAGE PLUS cc
• www.mortgagepluscc.co.za
• 011.327.4489
• info@mortgagepluscc.co.za

What do I need to do?

Complete Smart Bond application form and hand it to the consultant / fax it to 086 560 1224 together with the following documentation:

• A copy of your valid Identity Document*
• Your latest salary advice/pay slip*
• 12 months’ bank statement if you are self-employed and not banking with FNB
• Details of the property you are buying

*For you and your co-applicant where applicable.

Legal:

Once your bond has been approved, you will be required to sign a loan agreement that stipulates the conditions, requirements and responsibilities pertaining to you and the bank.