The undisputed best way to go about shopping for your home is to get a bond pre-approved by your bankers or by using a bond originator before you go out looking for a new home. There are a few things to consider when your already have a bond approved.
Attitude of the Estate agent: Estate agents, like anyone who is dependent on financial institutions giving credit to customers in order for them to earn an income have a very different attitude towards a pre-approved buyer.
The agent knows that you are looking for a home and that you essentially have the money available. This is a huge bonus for the agent who will go out of his way to help you spend your money.
The other thing the agent will be very aware of is that you don’t have to spend your money with him/her but there will be other agents out there trying to help you spend it. The result is that once you have made an offer he will do everything in his power to get the seller to accept your offer.
Ability to negotiate: It is currently a buyers market with some areas selling homes for as much as 30% below their asking price. Both the agent and the seller know this and if you amke them aware right at the outset that the offer you make, albeit a low offer, that you are making other offers, the pressure will shift to the seller to accept what he knows is an approved buyer.
There is little as frustrating as accepting an offer as a seller only to find out that the deal has fallen through due to the buyers inability to get a home loan.
Bear in mind when dealing with sellers and Estate agents that they want to sell to you! You are holding the cards when it comes to buying and you will seek out the very best deal available to you. This attitude will make the seller think twice before counter offering and will have thje Estate agent working twice as hard to close the sale.
Be confident when you make an offer, apply for bond pre-approval before you go out on a show day.
If you have recently thought that you no longer want to waste money on paying rent and you would rather use the money to pay into a home loan then it is possible to do so. For your own purposes, using the mortgage calculator will give you an idea of what the payments will be according to the amount you wish to loan for the purchase of your new home. Continue to read the home loan qualification criteria to see what your chances are of getting the loan you need.
There are factors and criteria that are required to qualify for a home loan. This means that the bank needs to know that you are able to pay money towards the loan every month. Therefore proof of a job, the amount you get paid and how long you’ve worked at the company or if you are self employed you need to at least have 2 years proof, your ID is also important. As the bank needs guarantees, you would need to fit into a certain income bracket to qualify for a home loan which is calculated according to your means.
There are two options for first time buyers: 1.If you have money that you can put down as a deposit for a home loan or 2. you do not have a deposit and you qualify for a home loan then the bank can grant you over a 100 percent loan.
In order to determine the amount you will pay the bank back every month is based on the interest rate. If you have money and you put a deposit down depending on the amount of the deposit in ratio the cost of the house; the bank will calculate a percentage using a loan to value ratio. This ratio refers to the amount of the bond that you’re applying for and the cost/value of the property you want to purchase. The percentage that is calculated will determine the amount which will become part of the interest rate you pay every month.
The minimum bond you can apply for is between R100 000 and R150 000 so if your LTV which is your Loan To Value ratio is calculated at a low percentage this means that the interest rate will be low as well; as it is directly proportional to the interest rate in other words the lower the LTV percentage the lower the interest rate will be to pay the bank back each month.
If you do not have a deposit then you can ask for a home loan that covers everything. Often first time home owners do not have extra money to put down as a deposit so therefore the bank makes provision for this. A bond for over a 100 percent normally 110 percent bond will cover the cost of the home and other home loan expenses including transfer fees for example. As there is always a time period associated with applying for a bond the norm in this case would be thirty years. As terms and conditions vary inquiring at a bank or using findbond.co.za can assist you with your requirements and needs.
Investing in your own home means that you can renovate or build on to your home as you like and you have the financial aid to do so. Many banks or financial institutions have requirements in order for you to qualify therefore making sure that you have a reliable and stable form of income is the first step to take to qualify for a home loan.
Why is budgeting important? Because if you plan your budget well you could be bond free in just a couple of years. Your bond is a big noose around your neck and although the interest rate is less than your credit cards or vehicle interest, the length of time it takes to pay it off is crippling you with Interest. If you use the bond calculators to see the difference it makes to add an extra 10% or more to your payment, you will be astounded at how much interest it save.
Here are 6 reasons to keep your financial goals in check:
- No more debt: List your income and expenses. Budget for each item; fixed expenses such as car payments stay the same each month. Put a set amount of money aside for variable expenses such as food and clothing. Budgeting eliminates the need to overspend; it gives you control of the money you earn (income) versus the money you spend (expenses). To eliminate debt you need to derive a budget plan and monitor your spending. Eliminate the use of credit cards to purchase items you cannot afford. Stick to the budget at all times to stay out of debt.
- Make your dreams a reality: Another reason to budget is to finance for your long term goals; should you want to save for a holiday or to purchase a home. A sure way of attaining your long term and short term goals is to stick to your budget.
- Retirement: If you want to spend the best years of your life traveling the world then start a budget plan today. Build and renovate your home when you retire to live the life of your dreams. Whatever you choose to do; you can do so with a realistic budget plan.
- Be smart and save money: Overspending is common throughout the world; people live above their means. Allocate ten percent of your gross income towards savings; you might need the money for an emergency.
- Prioritize: Wants versus needs; keep your financial goals in mind. Focus on spending money on necessary items such as rent, car payments and savings before you overspend on entertainment.
- Eliminate financial stress: Budgeting is a secure and safe way to keep track of your expenses and save money. Using money wisely will give you the confidence you need to make your dreams a reality.
Budgeting is a good way to attain your financial goals in a responsible way. Many people use credit cards for impulse purchases; this is one of the reasons people are in debt. People spend more than they earn which puts financial stress and pressure on families.
Allow the money you earn to work for you by deriving a realistic financial budget. You can teach your children to do the same. It is possible to save for your future aspirations; discipline and focus are necessary to achieve your dreams with a realistic budget plan.
After years of renting an apartment you have decided to purchase a house. You are earning a good income and you would like to inquire about a home loan. What various bonds are available and which should you choose?
When requesting a bond you should consider what you want and what the bank will grant you. Accessibility to money in your bond and a hundred percent loan are obtainable from your bank should you have the financial security to pay the bank back. South African banks offer various home loan options therefore contacting your bank will be the next step.
As there are different types of bond options they are formulated based on the interest rate. The following are different kinds of loan options available from your bank:
Variable rate home loan is dependant on what is called a repo rate which is the lending rate offered by the South African reserve bank to other banks. Should the rate increase or decreases it will effect your bond payments accordingly.
Should you find that you are prepared to pay a set amount of money towards your bond then a rate that is fixed will be more suitable. In this case rate increases does not affect you and the monthly payment you make to your financial institution is consistent. This means that you are unable to benefit from a declined rate.
Should you however feel that you require a bond that meets a variable rate and a fixed rate then choosing a bond that is capped will suite your needs. This means that you repay your home loan at a different amount and you benefit from paying a lower loan rate amount should the interest rate decrease. To apply for this type of bond you would have to meet certain requirements.
Another option to consider is a bond that reduces its rate within six to twelve months. The lower rate is not dependant on the repo rate. This application is similar to changing your bond by doing so you can benefit from a lower rate. It is considered to be an effective way to conserve money and shorten the time to pay off your bond.
In South Africa people are fortunate to apply for a bond to finance their home or business. Certain requirements and financial records are presented to the bank from which they will ascertain for which bond you will qualify and the amount they will provide you with a home loan or business loan.
In order to benefit from the best option you can find a home loan mortgage broker to assist you with a bond that suits your requirements. FindBond.co.za will provide you with information on bond application, home loans and debt management. By Adriana Levi
You see your dream home at a price you can afford, the repayments are within budget and you are ready to sign on the dotted line. Be aware of the costs involved when buying a home.
There are a myriad of costs involved to home ownership that you should be aware of upfront and make allowances for. Have the cash available to deal with these costs as most are payable up front to your transferring attorneys or bank and could get you into hot water if you have signed an offer to purchase without making allowance for them.
- Bond registration costs
- Transfer duties
- Conveyancing fees
- Deeds office fees
- Rates and taxes
- Banks charges
- Home owners insurance
- Life insurance
A typical home purchase of around R1 million would amount to about 7% of the purchase price excluding the deposit. Deposits can vary from 0% to as much as 30% depending on the property and your credit rating.
Other costs to consider
- Moving costs
- Water, rates, and electricity
Moving into a new home has many additional and ongoing costs to consider. The likelihood is that you are moving to a larger home or a home with a garden or in a better area. Make sure you know what the rates are, they are different for every area and dependent on the size of the property and many other factors.
If you now have a garden you will need a lawnmower, use a lot more water, have additional security costs like armed response or electric fencing or both. These can amount to over R1000 a month and lets not forget what it costs to maintain an electric fence or automated gate.
Be aware of every possible additional cost going forward. Ask the real estate agent for all of the information about the average rates and taxes, water consumption and the prominent security services in the area. Call the security company and find out what the monthly costs are. DO THE RESEARCH, buying a home is a long term investment.
Applying for a second bond is primarily intended for home improvements and not to be confused with accessing equity available in your bond for other reasons like dealing with debt or purchasing other assets.
If you have had your bond for some time and wish to access the equity available, in most cases the bond can be converted to an access type bond which essentially gives you access to the capital amount you have paid off on your bond and you will be able to transfer it without limitation.
If you need to make additions or alterations to your home that will add value to the existing property, you can apply for a second bond to cover the construction costs.
The process of applying for a second bond is exactly the same as applying for a first bond where the bank assesses your ability to make the repayments, the value of the property before the alterations or additions and the value after the improvements. They will then lend a portion of the increase in value to embark on the project subject to certain terms and conditions.
Using a bond originator is recommended in applying for a second bond. It may be an option to move your existing bond from one bank to another at a better interest rate with fewer conditions than to simply accept what your existing bond holder offers.
Remember that a small difference of ½% in the interest rate can mean hundreds of thousands of savings over a long period, so explore all of your options before signing for a second bond and of course a bond originator costs you absolutely nothing.