Home repos falling; small part of total

The number of houses that banks have had to repossess due to their owners defaulting on loans, has dropped.

The price categories of most repossessed houses differ at the large banks.

At Nedbank the average price of repossessed houses ranges between R300k and R400k with very few boasting price tags of R1m or more.

First National Bank (FNB) and Absa say some people in all price categories are struggling to pay their loans. Most repossessed houses at FNB resort under the R800k to R900k price category, while “houses with big loans” are problematic for Absa.

Nedbank currently has 1,800 repossessed houses, but they represent less than 1% of its total home loans.

At Absa the number of repossessed houses represent less than 0,01% of all home loans. FNB could not release its figures as it is in a closed period before the announcement of its results. Standard Bank chose not to comment.

The banks attribute the drop in the number of repossessed homes to their efforts to help homeowners to keep their houses or helping them to sell them.

Luthando Vutula, executive manager of Absa Home Loans, ascribes the decrease in the number of repossessed homes to better economic conditions.

However, FNB and Nedbank are of the opinion that consumers are still under pressure.

Jan Kleynhans, CE of FNB’s home loans division, says consumers are still under pressure due to their big debt burden and unemployment.

The banks are doing their utmost not to lose too much money when repossessed homes are sold.

The best way to sell the houses is at private auctions.

André Potgieter from legal collections at Nedbank says the bank will only buy houses back if the reserve price set by the bank is not achieved at an auction. It is also the case with FNB.

Up to 80% of the property’s value is usually achieved at auctions, says Potgieter.

Vutula says “less than 1%” of repossessed homes are currently being sold as people are looking for bargains. “Affordability remains a problem due to the fragile economy.”

Kleynhans says the majority of repossessed homes at FNB do find buyers.

Potgieter says the bank helps clients with repayment options if they go into arrears.

The loan period is sometimes extended when someone is in deep trouble.

The extension of the loan period is equal to a new loan agreement with which the stipulations of the National Credit Act (NCA) is taken into account. It means that some people don’t qualify for a new agreement.

Nedbank currently grants one out of every three home loan applications.

Some of the reasons why banks reject applications for loans include the fact that the applicant is on a credit bureau blacklist or that he won’t have enough money to meet his other obligations if the loan is approved. – Adri van Zyl, Sake24

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

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