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

Determining the property asking price

When putting a house on the market, there are many factors that play a role in determining the asking price for the property.

Both buyers and sellers should be aware of the factors that influence real estate marketability as they ultimately determine the value of property, says Real Estate Experts in South Africa.

Some of these factors include those of demographic change, progression and regression, and supply and demand.

Estate Agents says an important factor that determines price is the demographic change within a neighbourhood, be it negative or positive.

All areas experience transformation, either in the form of growth or decay and these circumstances will severely affect the value of a property when the time comes to sell.

Extreme examples of these are suburbs such as Hillbrow and surrounds.

They say in circumstances where the demand for property far exceeds the amount that is available in the market place, the price of homes and rentals usually increases as people are willing to purchase at a higher price rather than risk no purchase at all.

The strong demand for property leads to the building of more housing developments and accelerated growth in supply of property such as South Africa had from 2005 to 2008.

However, this often results in a surplus of housing, which causes the reverse effect in the market, especially when the market is affected by unavailability of loans, high debt levels, and unemployment.

“In the current market, this reverse scenario is in effect with the supply of property surpassing the demand for it.”

Unfortunately, with such steep growth and frenzied buying driving prices sky-high, most sellers who are now trying to off-load in the current market cannot realise the same price that they paid for their properties if they purchased in the period between 2007 until now.

This “buyer’s market” offers great opportunities for potential buyers” states Mr Prinsloo.

Houses within a neighbourhood that all conform with each other as they are of a similar size and style with the same number of rooms, for example, will all fall within a similar price bracket and the maximum value for these properties will be obtained.

The values of properties that do not conform within the parameters of the houses in the areas surrounding them may be affected by the principles of progression and regression.

The term “Principle of Regression” is used to refer to property of high value that due to its location within an area of lower valued properties is negatively affected and may suffer, as its true value is not perceived.

Similarly, the “Principle of Progression” refers to the increase in value of lower-valued properties, which are in close proximity to houses of higher value.

In short, it means that the properties around you have a negative or a positive effect on the value/price on your property, he says.

“It’s all about location, location, location and it is best to buy the worst house in a good neighbourhood at a higher price than the best house in a bad neighbour at a lower price.”

He adds that one has to think about the future of their investment and make the decision that will be best as a homeowner in the long-run.

Homeowners and would-be buyers can get an online property valuation report, which will show actual sold prices of other similar properties in a suburb, street or complex. This provides a useful guide in determining the market value of a particular property at any point in time.

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