How much can I borrow for a mortgage?
One of the first question everyone asks when they are thinking of buying a property is ‘how much can I borrow?’ This is not an exact science and all banks have methods to calculate affordability. Since the introduction of the National Credit Act this has become even more complicated. The most accurate method of establishing how much you are eligible to borrow is to contact a qualified mortgage broker.

Salary Multiples
A mortgage lender will lend you money based upon what they think you can afford to repay on a monthly basis. The calculation they used to use is broadly that 30% of your gross monthly income must be your maximum monthly mortgage repayment. Therefore if you earn R20,000 per month gross then your maximum repayments should be R7,000.

Under the National Credit Act, lenders now have to base your eligibility calculations on your monthly ‘disposable income’. To calculate this you need to take your gross income, less all the deductions like tax and UIF to get your Net income. They then calculate what your total monthly expenses are; groceries, car insurance etc, and finally they subtract all you month commitments to any existing debt you have such as credit card, vehicle finance, or loan repayments. The balance (if there is one) is your maximum monthly mortgage repayment.

The banks normally add in a ‘buffer’ for interest rate rises etc, so you may actually only qualify for 85% of this figure. You then need to work backward to get the actually bond amount these monthly payments will allow you to service.

A lender will look at your bank statements and your regular outgoings to check that the expenses you have declared are in line with your outgoings on your bank account. They also have access to the Credit Bureau’s information so they can check that the liabilities that you have declared are correct. If you run a tight ship with regard to your finances, you may be able to get a bigger mortgage than you would do under the traditional salary multiple guidelines. Conversely, if you’re already ‘maxed out’ with credit cards and personal loans, you may not get offered as much.

The National Credit Act (NCA) means lenders will be tightening their credit policy so as not to fall foul of the ‘reckless lending’ as laid out in the Act. This will not only mean that lenders will start using individuals net income for their calculations, but also they will look specifically at what other borrowings the applicant may have before they make a decisions on the applicants borrowing eligibility.

For a quick check to see how much you are eligible for please go to our mortgage calculators. The various lenders do vary in how much they will lend you depending on their individuals assessment of your risk.
Other income

Other Income
Lenders will take into account other income that you may have such as rental income, investment and dividends etc. Again, lenders do vary in how they view secondary income streams. Therefore you should always speak to your Mortgage Plus consultant to assess your full range of options.

As a rule of thumb lenders will take into account 50% of your rental income on a rental property. It is up to you as the borrower to prove this income. You must be able to show money going into your bank account and lease agreements. The longer the lease, the more they will value the rental income.

You can also take into account ‘contributions’ from other family members if they are living in your property. If a partner, or child is making a contribution to the ‘family finances’ then the banks will use it. Again, the onus is on you as the borrower to prove this.

Commission earner
If you are a commission earner the banks will take this into account. However, the best way to prove this to the bank is to provide six months payslips and calculate the average commission earnt.

Annual bonuses
These can also be taken into account but you will have to prove them with entries on your bank statements and letters from your employer.

Self-employed individuals
It is harder for banks to lend to self-employed individuals because it is often harder to prove the income. The better you manage your accounts (and the more accurately) the easier it is for the banks to lend to you. Proof of your income will have to be provided in the form of Audited Financial Statements, latest management accounts and six months bank statements, as well as a letter from your accountant verifying your income.

Partners / Spouse’s income
If you are purchasing with a partner or spouse then lenders will take their income into account.

Note: Remember that banks want to lend money. That is how they make money. The banks have come under considerable pressure since the introduction of the National Credit Act not to ‘lend recklessly’. Make it easy for a lender to grant you a loan by managing and recording your finances carefully.

By choosing Mortgage Plus for a loan, you will get that continual service 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

First Time Buyers
Well done! The decision to buy a home has proven to be one of the best made for millions of happy home owners. It’s a fact that property is a good investment, especially when you compare it to paying rent. It is important, however to enter the property market with a good understanding of how a property purchase works, what your costs will be and a respect that this is probably one of the largest financial commitments you will ever make.

 
Best advice
Your Mortgage Plus consultant will give you the best advice on all aspects of your home purchase, and most importantly on financing it, particularly when the banks differ in their approach to lending. We will help you understand the different interest rates, fees and charges, and terms and conditions available. We will explain to you the features of the different loans and why they are more suited to your individual requirements.

 
Important Pointers
• Know what you can afford and the costs

• Consolidate your finances

• Significant savings are possible by consolidating all your finances. As home loan rates are significantly lower than those for personal loans, overdrafts and credit cards, but significantly higher than savings and current account rates, it makes sense to consolidate everything into your home loan account.

 
Minimise your Mortgage
By effectively structuring your finances, you can significantly reduce your total home loan debt. Arranging part of your salary to be credited directly to the loan and making additional repayments on an ad hoc basis (like when you get a bonus) will have very beneficial results. By sticking to a workable monthly budget and avoiding unnecessary debt, you can repay your loan much more quickly and save vast amounts of interest. To find out how much interest you can save and how many years you can take off your loan, contact us today.

 
Example

You can settle your home loan in 5 years:

• Pay off an extra 1.2% of the original capital debt each month (R1 200 per R100 000)

• Adjust for interest rate changes when they occur

• Don’t access funds already paid off

Whilst this may mean some sacrifices, you will save a fortune in interest.

 
To qualify:

• Deposit of anything from 15% – 30%

• First time home buyers only

• Have a clean credit record.

• Minimum loan amount of R100 000

• Single or joint income must be minimum R6 000 a month

• Your monthly bond repayments cannot exceed 30% of your gross monthly income. Also refer the National Credit Act stipulations.

• Permanent employment

You can take advantage of the option provided by certain banks of a 3 month holiday on home loan repayments.

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

Property development is a complex subject, and equally complicated to finance properly. So you’ll definitely want to research into things a good bit before you dive on in. There are sites on the internet that specifically cater to people who need advice on how to get good rates on loans for property development, and highly specialized brokers who’ve done this sort of thing and are used to matching lenders with those looking for good loans.

Don’t fall into the mistake of assuming that property development loans have a lot in common with personal loans. The scale is vastly larger with personal development loans, for one thing, and the larger sums of cash being handled in the transactions means added complications in general. The specifics of a loan depends on more than just your intentions or the project’s raw size. Your proven ability, or lack thereof, in handling these kinds of property development projects also makes a big difference.

So, all these different factors can bring the rate of interest higher or lower. You should, however, expect the rate to be roughly around one and a half to two and a half percent. The period of time you can access the loan depends on the size of the project, with larger projects having loans accessed over years. A broker being in on things from the very beginning is a good way to help you keep a handle on things and make sure you get the best deal while understanding all the aspects of the loan and its impact on your property development.

Extremely large projects will probably be most conveniently financed by interest-only loans, which require you only to pay back the relevant interest of the loan. Monthly payments will be less than in a repayment loan, and you’ll hopefully have the cash to pay off the full amount that was loaned to you when the loan gets to term.

In contrast to interest-only loans, repayment loans have very high payments per month. On the other hand, you can rest easy in knowing that those are the only loan-related expenses you’ll have to deal with, rather than having the final fee hanging over your head the whole time. You can just pay up the loan through the term and then be done with it. Both types of loans have their advantages and disadvantages, and you should talk to an expert to see which is right for your project.

And don’t forget to take care of the needed planning for these kinds of things before you try to get a loan. Lack of planning permission will be a huge barrier to getting a decent loan of any sort whatsoever, so do things in the proper order.

Last of all, while the expenses of a broker aren’t completely negligible, it may still save you a lot in the long run to have one for property development loan management. Brokers, in addition to knowing a lot about how the system works, simply have access to more resources and lenders than the average person. Don’t be ashamed to get the help you need to finance your project the way it needs to be.

CONTACT US
For more assistance with regards to Applying for Home Loan Finance .
Email: morne@mortgagepluscc.co.za
Ph: 011.327.4489
or Complete This Online Form