Budgeting to help pay off your homeloan

Budgeting to help pay off your homeloan

budget managementWhy 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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

Home loans, what are the options

Home loans, what are the options

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

5 things you should know before applying for a home loan

5 things you should know before applying for a home loan

Banks are competing vigorously for bonds in a market where their lending has been restricted by recessionary fears and now being opened up. The banks have a lot of cash available to lend right now and are seeking to lend to individuals or campanies that are in good standing credit wise. The better your credit rating the better interest rate you will receive.

1. Your own bank will seldom give you the best home loan deal.
This trend has become more and more evident over the past year, as banks try to woo new clients from their competitors. Moreover, we’re seeing a sharp rise in instances where bonds are being declined by a client’s traditional bank and approved by another bank with which the client has no connection.

2. Your bargaining power ends the day your bond is registered.
If you’ve ever tried to get your bank to lower your bond rate, you’ll know what I mean. Make sure your bond originator shops around among the various lenders to secure the best possible rate concession. It’s too late to seek a better deal once your bond is registered and switching your bond from one lender to another is no longer viable.

3. You must give 3 months’ notice to cancel your bond.
When you sell your property, you should give the bank 90 days’ notice of your intention to cancel your bond. If you don’t, you’ll be charged a punitive cancellation penalty equal to 3 months’ interest. On a bond of R1million, this is like throwing R25 000 down the drain. The banks are inflexible on this cancellation penalty, and will no longer waive it, even if you place your next bond with the same bank.

4. Voluntarily increasing your monthly payment by a small amount will knock years off the term of your bond.
The miracle of compound interest! Play around with the Bond Calculator on my website and you’ll see that by repaying an extra R312 per month on a R1m bond, you’ll knock 5 years off the term of a 20 year bond and save yourself R433 160!

5. Make sure you’re getting the best insurance deal
Homeowners Comprehensive Insurance is compulsory if you have a bond. In the past, this cover was provided automatically by the bank (the mortgagee) and you were not allowed your own choice of insurer. Now you, the mortgagor, can shop around for the insurance cover that best suits your needs, and your pocket. Be aware, though, that should you choose an outside insurer, the bank may levy a monthly “admininstration fee” on your bond and this could negate the effect of a cheaper premium.