Do not Pin your Hopes on Pre-Approved Finance or Home Loan Pledges

Many moons ago, if you went to your bank and asked how much money it was willing to lend you in order for you to buy a home, you would more likely than not have walked out with a pre-approved bond. This document was almost cast in stone and virtually guaranteed that if you found a home priced within those parameters, the deal was all but done.

Although some banks still advertise pre-approved bonds, these days, this document does not guarantee that a home loan for a specific amount will be granted. It merely serves as an indication that the applicant will probably qualify for the required financing.

While this may be viewed as a waste of time, in actual fact, the exercise can be extremely helpful. Buyers, particularly first time purchasers, often have unrealistic expectations as to what they can afford. The National Credit Act and the overall economic situation has well and truly put a spanner in the works and put the brakes on the amount that banks are willing to lend, even if the applicant earns a relatively high salary.

Debt is a major problem in South Africa and banks now have to scrutinise each and every person applying for a loan extremely carefully. In the old days, the banks weren’t terribly concerned as to how much debt you had, these days, everything, including school fees, your domestic worker salary and your clothing accounts are taken into consideration before additional finance will be granted.

It’s not the only house buying hiccup you can expect. Even if a bank is willing to part with its money, it is not willing to do so if the risk is too high. In other words, even though you may qualify for a certain amount and have found a home that is priced within the budget, the bank will not finance the home if it deems the risk too high. This could apply to properties that are, in the banks view, overpriced.

You may feel that it is entirely your business if you are willing to pay too much for the privilege of owning a home. The banks, however, look at things a little differently and because essentially the property belongs to the bank until the final bond instalment is paid, it has a vested interest in the deal. As stakeholders, banks are not going to risk putting up the money on a deal where if something goes wrong, they are going to battle to get a return on their investment. It would be interesting to find out just how many overpriced properties sales collapse for this reason.

Those with little debt, a good credit record and the required income are going to find it easier to buy property. Even with pre-approval those with a dodgy credit history, those whose taxes are in arrears or those who are up to their eyeballs in debt are not going to be able to get a bond, regardless of how much they earn. These days investing in property is not only about the money, it’s also about the details. Homeownership is a privilege and no one is going to finance a deal unless the buyer can prove that he is responsible, solvent and in a good position to pay the money back.

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

Buying property privately in South Africa

If you decide to buy property privately without the help of a real estate agent, you need to understand how the process works in the South African real estate market. In this concise, but informative, buyer’s guide, we explain each step of the way to reaching your dream – to put you on the right track and hopefully make you realise that buying real estate privately is neither very different from using an agent, nor as complicated as it may seem.

Step 1: Work out the price bracket you can afford (Affordability Calculator)

This may sound obvious, but you would be surprised how many people actually overstretch their budget when buying a property, only to find it difficult to keep up with mortgage payments or realise that they have no money left over for any necessary property renovations.

Work out carefully the total amount that you can afford based on the cash you have in hand and on a proper mortgage evaluation from a couple of banks or lending institutions. By being pre-approved for a loan through Mortgage Plus Bond Originators, you will know where you stand and minimise the chance of being disappointed by the financial institutions “banks” at a later stage.

Keep in mind that this total sum will have to cover the purchase price, transaction fees and any immediate work you will have to do on the property before you can move in.

Step 2: Find out which areas you are interested in

Do some homework on the areas available. Browse the Internet for information on those areas that catch your interest. The websites of the Town Councils in the region you want are a good place to start. Also, use the Internet to make a quick search for property for sale online, to get an idea of what properties are available in your price bracket and where they are located.

Eventually, you’ll have to make the trip and visit the areas you are interested in for yourself. It’s best to get in your car, a good map and drive around so that you can get a better feel of the areas and their surroundings. On your way, keep a lookout for services such as shops, schools, medical facilities etc. It is also a good idea to visit at different times of the day and on different days to get a better idea of traffic conditions, weather and so on.

Step 3: Search for properties in your areas of interest

The best – and most convenient – place to start searching for your property is the Internet of course. If you don’t find what you are looking for online, you could check the classified adverts in local newspapers and magazines or even drive around the area looking out for ‘For Sale’ signs. Moreover, if you still cannot seem to find the right property for you on the private market, or if you would like to search concurrently among real estate agents in South Africa we recommend you look at our list of trusted real estate partners.

Step 4: Schedule viewing appointments with the property owners

Once you have identified one or more interesting properties, call the owners and get as much information about the property as possible over the phone. Choose the ones you want to visit and arrange a time with the owners for a viewing. Before your property inspection visit, you should come up with a checklist of points to look out for. This property inspection checklist we have prepared is a good place to start.

When you visit a property in the presence of its owner, it is common to feel like you are intruding into someone else’s life, especially if the property is being lived in. However, remember that as a buyer it is your job to inspect the property thoroughly and that the owner actually expects you to do this. Naturally, politeness and common courtesy will go a long way in this situation.

Most importantly, do not shy away from asking the owner any questions you may have.

Be sure to find out:

• the age of the property
• how long the seller has owned it
• why the house is being put up for sale
• how much community fees are (if applicable)
• the statutes and laws of the home owner’s community (if applicable)
• the location of and distance to nearby services
• evidence of planning permission for any alterations/extensions, etc.
• which furniture or fittings will be sold with the house (though remember you are buying a house, so don’t be swayed by fancy extras)

Step 5: Get an independent evaluation of the property (optional)

Although this is really an optional step, it is highly recommended that once you are very interested in a property, you have it inspected by a qualified real estate surveyor. The surveyor will be able to give you an objective appraisal of the property, tell you if the property is overpriced, and even point out any important things you might have missed.

If you are going to ask for a mortgage, you might want to coordinate with the bank on the property inspection since they will send their own surveyor anyway (whose fees you will have to pay) prior to considering your mortgage (home loan) application.

Step 6: Negotiate the price and terms of the sale

There is no reason to shy away from negotiating when you buy property. In fact, it is usually an integral part of the process.

How much you can negotiate price-wise will largely depend on three things:

• how long the property has been on the market
• how urgently the seller wants to sell
• and how much interest the property is attracting from prospective buyers

On the other hand, as a buyer, you must stick to your budget and discard a property if the seller is unwilling to drop the price to something that you can realistically afford.

Keep in mind that by selling privately, the seller is saving thousands of Rands in real estate agent fees, so, in a private sale, there is that much more leeway for negotiating a price below the actual market value of the property. The seller may also be more willing to drop the price a bit if they have demanding sales terms that you can accommodate (for example either a very short or more drawn out transaction period).

Once you have agreed upon a price and upon a date when the sale will take place, you will sign an Offer to Purchase / Sale Agreement laying out all the terms of the Offer to Purchase you can start arranging your new home loan or mortgage finance with Mortgage Plus Bond Originators.

If you would like to speak to a Professional Mortgage Specialist about your lending requirements, please phone Mortgage Plus Bond Originators on:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za