The word “home loan” or “mortgage” have exactly the same meaning. Since most of us do not have enough money to pay cash for a home, we need to apply for a home loan or mortgage from a bank to assist us with the purchase

If you found the home of your dreams and the bank grants you a home loan then your bank will pay the owner of that property. Thereafter you will have to start to making monthly repayments to pay off the debt you now have

Although the definition of a home loan is straightforward, the actual process is very detailed in nature. Here are some basics about home loans that you should know.

Home loan amortization

Amortization is a term used to describe the payment of a homeloan through a schedule of systematic payments. You will have to keep up with your monthly payments to the bank until your home loan is paid in full.

Your monthly payments are made up of principle (the original loan amount) and interest payments. A loan amortization schedule shows the allocation of each loan payment to interest and principle

Loan Term

Your loan term is the amount of time it takes you to pay off your loan. The loan term can vary from 5-30 years, although most people in South Africa, prefer a 20 year loan term.

The longer you take to pay off your loan the lower your monthly repayments will be, but at the same time the interest that you will be paying will be much higher.

Types of Mortgages

The most common ones in South Africa are the fixed, variable rate mortgage as well as, more recently, the interest only mortgage.

A fixed rate mortgage means that your repayments remain the same over a certain period. The only increase that you can expect is the result of increases in insurance rates and property taxes.

With a variable rate mortgage your monthly repayments will fluctuate. If interest rates are going down your monthly repayments will decrease, but should rates go up your payment will increase accordingly.

With an interest only mortgage you only pay off the interest on your loan and delay the repayment of the principle debt. However, you will have to settle the debt eventually by either restructuring your payments or by selling your home.

Financial Calculators
If you are comparing either a fixed, variable or interest only mortgage home loan, then you could use one of our financial calculators to help you decide.

You should now have a much better understanding of what a home loan or alternatively a mortgage is.

For a more detailed discussion on various subjects you can call us on (011)327-4489 or go to www.mortgagepluscc.co.za

With banks beginning to relax their lending policies supporting a revival in the property market now is the time to apply for a bond.

“With the relaxation of lending policies there should be a much improved chance of being approved for a loan on favourable terms. “Banks are once again offering 100% loans and the current lower interest rates make it a better time for consumers looking to buy.”

Getting that bond approval.

Checking affordability

Before you even apply for a loan, check whether the property is affordable.

“Determining the right price range is an essential first step to avoid wasting time looking at unsuitable properties. Our Mortgage Plus property finance consultant will take you through the exercise of establishing what you can afford, taking into account your specific financial requirements. Monthly repayment affordability is generally calculated at 25 to 30 percent of joint gross income, but other criteria, including existing debt commitments, may affect the size of the loan that the bank will grant. Remember that the ‘hidden costs’ (transfer and bond registration fees) usually have to be paid upfront, and add a sizeable amount to the cost.”

Get prequalified

One way to ensure that the loan you apply for will be granted is to get a prequalification. Companies, such as Mortgage Plus, will at no cost, prequalify you for a certain bond amount which takes the stress out of applying for a bond once you have decided on buying a property. An additional positive factor is that buyers who are prequalified are in a much stronger position to negotiate with sellers.

Check your credit record

Bond applications may be declined for several reasons: you may not be able to afford the monthly loan repayments, or may require a 100% loan that would push the repayments beyond your reach. Another critical consideration is your credit profile.

“This includes your employment history and consumer bureaux results, which provide a picture of your debt and payment history. If the bank considers you a good credit risk, it will assess the value of the property to be purchased. If this too meets all the relevant criteria, the loan is usually granted. Mortgage Plus also often motivates the merits of a particular loan application to the bank’s credit manager.”

To improve your credit record you can start cancelling out-of-date credit cards; and ensure that you pay all instalments on existing debt by the due date every month.

Submit the correct information

To assist the bank in determining its risk, you will be required to provide personal information such as bank statements, salary slips, a statement of assets and liabilities, a statement of your monthly expenses and information on your credit history, including whether you have ever been insolvent.

If you go through an originator, such as Mortgage Plus, they will ensure you have all the correct paper work to avoid unnecessary delays.

Get the best interest rate

The lower the bank’s risk in lending funds to a particular borrower, the better the rate it will offer that individual. In calculating its risk, it will consider factors such as the amount of equity you are willing to invest into the property, i.e. your deposit; the size of the loan; and the repayment-to-income ratio (the ratio between the bond payment and the buyers income).

The type of bond you apply for, your credit history and the investment value of the property you intend buying also affect the rate you will be offered. Shop around and negotiate with various banks to ensure you get the best package. A convenient way to do this is through the services of a mortgage originator who facilitate it all on your behalf as a free service.”

“While a deposit is not always required, try to put down 20% or more if you can, as the bank is more likely to offer you a better rate as the risk of the loan is reduced,”.

Use a mortgage originator

Finally, we suggests that consumers looking for the best deal on home loans should make use of a mortgage originator.www.mortgagepluscc.co.za

Mortgage originators specialise in shopping around between banks and negotiating the best deal for the customer for free.

“Obtaining a preferential rate of just 0,1% below the prime rate can make a big difference to your monthly repayments. However, in negotiating the best package, the mortgage originator needs to take more than just the rate into account and will structure a package that best suits the individuals needs overall.

“With the property market beginning to perk up and banks loosening lending criteria as well as granting 100% loans, now is the best time in the last two years to apply for a bond.

To Apply For Your Bond Please Go To www.mortgagepluscc.co.za or call us on (011)327-4489