How much house can you afford?

You and your wife are buying a home, what home loan should you consider? We’ve given you an equation to work it out. Very simply, the major banks will give you up to twenty times your combined monthly salary. What else should you consider? Keep an eye on these important factors:

1. Future interest rate increases: The vast majority of bond foreclosures occur during times when interest rates are high and monthly installments become unmanageable. Very few families can pay more than 25% of their monthly income on bond repayments. That’s why banks put their lid on at this percentage. Consider taking a loan for less than you can presently afford, you may come to be grateful you did!

2. Possible salary reductions: Most people’s salaries don’t decrease but if you’re self-employed, work on a commission basis or have any other form of uncertain income, make allowance for a possible downturn in the future. Will your wife continue working for the next ten years? If not, allow for the future loss of monthly income. Give yourselves some breathing-space.

3. Increased future expenses: Another good reason for taking a home loan for less than you can presently afford. It may be your child’s future university education, repairs to your home, higher levies or rates, and other similar burdens. Some foresight and wisdom now will hold you in good stead at any future time when your spending power may be less than it is now.

Click Here to go to our Maximum Loan Calculator

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

6 Tips for a successful mortgage application

As a young South African, buying property might not be at the forefront of your mind but with interest rates in South Africa relatively low and property prices at a realistic level compared to the recent boom, now is a great time to get onto the property ladder. And with banks granting first time home owners mortgages of up to 104%, you don’t need to spend years saving for a deposit.

When the time does come for you to apply for a mortgage, you don’t want to find out that you aren’t eligible because of a low or non-existent credit score. A bit of preparation can pay off in the long run and you should start considering what you can do now to make your mortgage application easier when you want to buy.

Make debt

A good credit rating is one of the most important factors in having a mortgage approved to finance a property. The only way to get a credit rating, ironically, is to have debt. Your overall credit rating is calculated according to a number of factors with different weightings, resulting in a score of between 300 and 800. As a general rule of thumb, your credit rating needs to be at least 640 for the banks to consider you credit-worthy and a low risk.

Then manage it well

Before you rush out and spend on credit, banks also want to see evidence that you can manage your debts well and pay them on time. So much so that the payment history on pre-existing loan accounts contributes 35% of your overall credit score and outstanding amounts owed contributes 30%.
Remember though that it is not only “formal” loans such as store cards, credit cards, student loans and car loans that contribute to your credit history. Not paying other bills such as traffic fines can also have a negative impact on your credit score.

Don’t wait, act now

Other factors that affect your credit rating are the length of your credit history, new credit accessed and the type of credit involved.
So, before buying a property, you should carefully build a good credit history by accessing appropriate debt and then managing it well.

Credit card conscious

One good way to do this is to use your credit card for expenses but then pay off the balance at the end of every month to avoid being charged interest. Another credit card-related tip is to never use more than 50% of the amount you have available to you. If you are constantly reaching your limit, this shows the bank that you are living right on the edge of your income.

Get a full-time job

Banks will insist the lender has been employed for at least a year, and will ask to see three months of salary slips, or six months of bank statements if you are self-employed.

Sooner rather than later

Property is a fixed asset that can grow substantially in value, so it can provide an important foundation for financial security in future. So, while the thought of a 20-year financial commitment might seem overwhelming to many young adults, especially if you have just achieved financial independence, there are many good reasons to get on the property ladder sooner rather than later.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za