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For more Information call Morne Prinsloo on 011.327.4489


Tag: Property

What is a mortgage? - www.mortgagepluscc.co.za

• A mortgage is a loan that is secured on immovable property, normally your home, hence the term “home loan”.
• The mortgage is lent to you in a lump sum to pay for the property and is legally bound to the property by the attorneys who register your mortgage bond. You then have to pay back this mortgage over a given length of time.
• This time period is usually 20 years, but it can vary between 5 and 30 years depending on circumstances.
• If you don’t make payments as agreed, the lender has the right to sell your property in order to recover their money. This is rare but it is important to understand from the outset that if you do not keep up with your mortgage payments you are at risk of losing your home. 

How much can I borrow for a mortgage?Affordability Calculator

• This is often one of the first questions to be asked.
• Unfortunately it is not an exact science and all banks have their own methods to calculate affordability.
• Since the introduction of the National Credit Act this has become more complicated.
• The most accurate method of establishing how much you are eligible to borrow is to contact your Mortgage Plus Bond consultant.

Do I need to put down a deposit to buy a house?Lump Sum Deposit Calculator

• Whenever you sign an offer to purchase you will be asked to put down a deposit.
• This will range from a few thousand Rand to 20% of the property price depending on the seller and estate agent.
• The act of putting down a deposit is an act of goodwill and is a show of commitment. 
 
When and to whom is the deposit paid?

• The deposit is usually paid within a time period stipulated in the offer to purchase. This time period is for you to negotiate with the estate agent, but the norm is 2 weeks from the date of signature. This deposit does not go to the seller but is paid into the conveyance attorney’s trust account. Some estate agents may ask you to pay the deposit into their trust accounts.
• These trust accounts are interest bearing. If your deposit is going to be sitting there for a long time before transfer, be sure to ask the attorney what the rate of interest is on the trust account in order to know how much interest you will be earning on it.
• Some lenders will offer loans, particularly to first time homeowners, to cover the purchase price and also the additional purchase costs. This is commonly known as a 108% home loan (because it is 8% more than the value of the house). If you are planning on applying for a 108% loan you will probably still have to put down a deposit to secure the property when you sign the offer to purchase. This deposit will only be released back to you on transfer. Please note the 108% loans is not always available.
 
Does the size of the deposit matter?

• Generally the larger the deposit (as a percentage of the value of your house), the better the interest rate you can negotiate with the bank.
• This is because the lenders know that if you default on your loan and they repossess the property, there is more chance of them getting their money back on the sale of the property. Hence there is less risk to the lender.
• The larger the deposit you put down, the lower the rate of interest you are likely to get.
• A larger deposit also reduces the risk of you going into negative equity, where the value of your house falls below that of your mortgage. This makes it difficult to sell your house because the proceeds won’t cover the debt you owe. 

What additional costs are associated with mortgages?Pre approval and Bond Cost Calculator

The main additional costs are:
• Transfer fees
• Conveyance fees
• Bond registration fees
• Valuation fees
• Initiation fees

What are transfer fees?

• Transfer fees are payable to the South African Revenue Service (SARS) whenever you buy a house valued at over R500 000. • Calculated as a percentage of the purchase price and vary according to the purchaser’s legal status.
• The transfer duty is paid by the purchaser of the property prior to registration of transfer, or within six months of signing the agreement.
• There is a penalty fee for late payment of transfer fees.
• Contact your Smartbridge mortgage consultant to work out your transfer fees.
 
What are conveyance fees?

• Conveyancing (attorney) costs.
• The conveyancing attorney is appointed by the seller, but paid for by the buyer.
• Conveyancing fees are on a sliding scale that your Smartbridge mortgage consultant can give you.
What are bond registration fees?

• Bond registration (attorney) costs.
• The attorney registering your bond will charge a fee.
• They receive instruction from the bank that has approved your home loan, draw up the paperwork, do FICA checks and lodge this with the Deeds Office.
• These attorneys should be in touch with you within a week of your mortgage being approved. They will ask you to come into their offices to sign the necessary documents.
• Bond registration fees are charged on a sliding scale.
• Your Smartbridge mortgage consultant will be able to inform you how much these will be.
 
What are valuation fees?

• Bank valuation fees.
• After the introduction of the National Credit Act the banks no longer charge a valuation fee but have included it in their increased initiation fee.
What are mortgage broker fees?

• Mortgage brokers are paid a commission by the lender for every mortgage organised on behalf of their clients. A mortgage broker should not charge their client a fee.
• As a client, always ask your mortgage broker about their commission relationships with lenders. Good brokers will always disclose this information.
• You will require significant additional funds to cover the deposit and fees. Remember to include these costs when calculating how much you can afford to spend on a house.

How much will my mortgage interest rate be?

Your mortgage interest rate will depend on a number of factors such as:
• The loan to value ratio (the size of your mortgage compared to the price of the house you are buying or own).
• Your repayment to income ratio (the cost of your monthly mortgage repayment to your gross monthly income).
• The size of your bond.
• Your credit profile.
• Contact your Smartbridge mortgage consultant for advice on your likely interest rate.
• The interest rate charged on your mortgage is crucial. It will determine how much you can afford to borrow and therefore how much you can afford to spend on a house

How is mortgage interest charged?

• In South Africa, interest is generally charged daily on your mortgage.
• Some lenders will allow you to pay your mortgage payments twice a month. This will dramatically reduce the amount of interest you will pay over the lifetime of your mortgage.
• Speak to your Mortgage Plus Bond consultant for more information.

Which type of mortgage is best?

• Most people will want the cheapest deal they can get on their mortgage.
• You may have to compromise on cost in order to get something that is more flexible.
• Fixed-rate deals are popular in the rest of the world but few South African mortgages are on a fixed rate. This is due to the uncompetitive rates offered by banks on fixed mortgages to offset the risk of volatile interest rates.

How do lenders structure a mortgage?

• The lenders take the loan required (this is known as the principal sum) and then work out the interest you will owe them over the full term of the mortgage.
• This is in effect an additional sum you now owe the lender.

How do I apply for a mortgage?

• Contact your Mortgage Plus Home Loan Consultant for the best possible deal. • Make sure you have as much information as possible when applying for a mortgage. This means exact salary details for you and your partner, exact details of expenses and debts, when bonuses are paid and details of any loans/mortgages already held. • When you are ready to apply for your mortgage, you should aim to complete the process quickly as lenders will state a time period during which they will guarantee the rate you have been quoted. This means you won’t be affected should interest rates rise. You will then have to wait to see if your mortgage is approved.

How do I calculate my maximum monthly mortgage payment? - Bond Repayment Calculator

Your maximum monthly mortgage payment is based on your monthly disposable income. To calculate your monthly disposable income: • Subtract all your deductions such as tax and UIF from your gross income to get your net income. • Calculate your total monthly expenses, such as groceries, car insurance etc. • Subtract your monthly expenses and existing debt such as credit card, vehicle finance, or loan repayments from your net income. • The balance (if there is any) is your potential maximum monthly mortgage payment.

I have additional sources of income, how will this affect my mortgage application?

• Lenders will take into account additional income you may have such as rental income, investments and dividends etc. • Lenders vary in how they view additional income streams. • Contact a Mortgage Plus consultant to assess and discuss your options.

Can family members make a contribution to my mortgage application?

• Yes.

• You can take into account contributions from family members if they are living on your property. • If a partner or child is making a contribution to the family finances, then the banks will recognise it. • It is your responsibility, as the borrower, to prove these family contributions.

I earn commission, how does this affect my mortgage application?

• If you are a commission earner the banks will take this into account. • The best way to prove this to the bank is to provide pay slips for six months and then to calculate your average monthly commission earned.

Is my annual bonus taken into account in my mortgage application?

• Yes.

• Annual bonuses are taken into account but you will have to prove them with entries on your bank statements and letters from your employer.

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

Plan for Future Rates Increases When Buying a Home

The Reserve Bank’s decision to retain interest rates at the present levels is obviously welcome for home owners, but the long term prognosis is that rates will gradually rise and property stakeholders should plan accordingly.

So says Gerhard Kotzé, CEO of the ERA property group. His views are based, in part, on comments by the Director of Standard Bank Home Loans, Funeka Ntombela, who was the keynote speaker at the recent ERA South Africa 2010 awards ceremony.

Ntombela outlined to a rapt audience her prediction of a continued upturn in the property market. But at the same time she hinted at the likelihood of future increases in interest rates, due amongst other reasons, to South Africa’s future borrowing requirements.

Adds Kotzé: “The last property bubble was fed partly by low interest rates as well as by unfettered lending and the ‘securitisation’ or bundling of mortgage bond debt into dubious financial instruments, much of it being of low quality.

“Consumers played their part in that they acted in the belief that cheap money would remain available indefinitely. This proved not to be the case and while I am all in favour of low interest rates, I believe caution should always be the watchword.

“The banks themselves are setting the tone in this respect with their conservative lending policies of the moment, but home buyers and sellers should also play their part by borrowing conservatively.

“That implies the need either for increased deposits, if at all possible, when buying a home, thus reducing the size of the bond and the associated repayments or buying less expensively on the understanding that building up a stake in property is a gradual process.

“Fundamentally it’s about avoiding a repeat of the situation where, as a result of the credit crunch, interest rates soared by five or six percent and home owners were severely stretched financially.

“The joker in the pack right now is that in a rare show of collaboration, the trade union Cosatu and the business sector, are jointly campaigning for a weakening of the rand, which would imply the possibility of lower interest rates. But don’t hold your breath would be my advice!”

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 buyersFirst 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.

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