Work out what bond you as a Purchaser should qualify for
The loan amount you can qualify for is limited by your monthly income and by your total disposable income. Only 30% of your income can be used to pay towards a home loan.
The National Credit Act has taken this one step further and banks are now required to ensure you have enough disposable income to support a bond repayment. Thus the way in which purchasers are assessed has changed.
To work out how much you qualify for:
Calculate 30% of your monthly income:
ie: R30 000.00 per month will be R10 000.00 – the bond amount would be limited to a maximum of R10 000.00. You will then have to list ALL your current expenses, including fuel, petrol, school fees, etc and prove that you can in fact actually afford to repay R10 000.00 per month back.
If after ALL expenses are deducted, you are only left with R6 000.00 then a bond with a repayment of R6 000.00 is all you will qualify for even though it is less than their 30%. Also remember that the bank looks at your credit record – do you pay your accounts on time? Are you black listed etc.
The good news is that if you are currently paying rent – this amount is added to your disposable income.
This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za
Properties under R1 Million, “To target Investors”
With the interest rate at the lowest in years, investors are now targeting buy-to-let properties. Many landlords are now looking at double-digit rental increases this year.
A strong recovery in investment buying is predicted for this year. Investors will be looking to buy properties priced below R1m, due to stronger returns being expected than cash in the bank. Property still remains the best value for money.
“FNB property strategist, John Loos, backs up these claims referring to the latest Stats SA figures, which show that residential rentals have steadily increased with an average growth of 5.6% recorded in November year-on-year. Sectional title flats have shown the largest increase, jumping by 8.6% while free standing houses recorded the lowest growth at 3, 56%.”
According to the TPN (Tenant Profile Networking) Credit Bureau the percentage of residential tenants paying their rent on time has risen to 81% in the 3rd quarter of last year. The number of defaulting tenants has decreased to 10%.
This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za
The Interest Rate Lingo
Current Prime Interest Rate = 9.0%
What is a Fixed Rate vs Variable Rate:
The interest rate on a fixed rate home loan does not change.
The advantage of this is that you are protected from rate increases and your monthly payments are consistent. The disadvantage is that you will not benefit when the prime rate is dropping.
The fixed rate will usually be slightly higher than the prime rate at the time of your application.
The variable rate means that your repayment amount will increase or decrease with the prime rate.
What is a prime rate?
The rate at which the bank is currently lending.
Repo Rate vs Prime:
The Repo rate (repurchase rate) is the rate at which the Reserve Bank lends rands to our local banks. This rate is usually 3.5% lower than the current prime rate.
Jibar Rate vs Prime:
The Jibar rate (jhb interbank agreed rate), is used by SA HOME LOANS, while the Prime rate is used by the Major Banks (STD, ABSA, FNB and Nedbank).
This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za
Positive Feeling for Property 2011
The residential property market has several factors in its favour going into 2011:
- exceptionally low interest rates
- slower-than-expected consumer price inflation
- decreasing levels of household debt
Where you aware that the interest rate is the lowest it has been in 36 years?
With decreasing household debt couples can now consider purchasing a home of their own. Banks will be more favourable to granting a higher percentage bond. Low interest rates are already helping the property market by putting extra money into household piggybanks and boosting the demand for credit such as home loans.
Economists are predicting another rate cut early in the year, which can only be good news to consumers.
Standard Bank has estimated that inflation will average 4.6% y/y in 2011, so even if house prices only grow at 7% – which we think is what we can reasonably expect – these will still beat inflation in most cases.
Experts predict there will be a noticeable growth in the “small house” segment sales. All in All there is an atmosphere of positivity for the property market. Although property won’t boom, there will definitely be growth. Purchase Price will still remain a strong factor. The general feeling is that buyers. Similarly, while access to shops, schools and major transport routes is still important, these are also secondary considerations to price and running costs in almost every case.
There is a general feeling of positivity and growth for the property market for 2011, although there consensus that we cannot at this stage expect a property boom.
This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za
Call To Reduce Electricity Use
“Heavy rains have hampered the supply of coal to Eskom power stations and the utility has now put 500 of its largest customers on a mandatory energy conservation scheme in order to cut electricity consumption in the country.”
It is a Great Time to Buy, but don’t Overspend
Homebuyers should never jump into the market with their eyes shut, even at times like these, when the combination of low interest rates and still-low property prices is creating some wonderful purchase opportunities.
Berry Everitt, CEO of the Chas Everitt International property group, says potential buyers – and especially those entering the market for the first time – should never lose sight of their own personal and financial circumstances, or of the fact that interest rates can go up just as easily and quickly as they come down.
“The low interest rates at the moment obviously do make it much easier to qualify for a home loan, to afford the monthly bond repayments and municipal charges, and to have money left over to keep the home in good condition.
“And as I’ve said elsewhere recently, prices in many areas are still below their pre-recession levels, which at the moment means that the sooner you buy, the better deal you are likely to get for your money.”
But it is extremely important, he says, for homebuyers not to purchase more home than they actually need just because it is “going cheap”, and vital that they leave themselves lots of leeway when working out what monthly bond instalment they can afford.
“Indeed, I think that buyers should always squeeze the price and not their budgets. What I mean by that is that rather than first finding a home to buy and then stretching the household budget to the limit to get the loan and afford the repayments every month, potential buyers should first take a hard look at what instalment they would feel comfortable paying, subtract some of that amount to allow for contingencies like the interest rate going up, and only then go shopping for the best house available in their price range.”
Everitt says good rule of thumb is that a new home should not cost more than 2,5 to three times the annual income of the family.
“So if your combined annual salary is R300 000, you should be looking at homes priced at R900 000 at most in order to keep up comfortably with the bond repayments once you have paid a deposit of at least 10%.”
Potential buyers, he says, should also bear in mind that the banks do not look at home loan debt in isolation. “Since the introduction of the National Credit Act, they have also been obliged to look at your overall financial situation – including debts such as car and credit card repayments as well as your regular monthly expenses such as school fees, insurance, food and transport costs and water and electricity accounts – before granting a home loan.
“And before you rush out to buy a home, I suggest this is what you should do, too, to ensure that all your debt commitments together will be manageable, even if interest rates rise. For peace of mind in this case, I would suggest that your total monthly debt repayments, including your bond instalment, should not exceed 40 percent of your income – which means they should add up to R10 000/ month or less if your combined monthly income is R25 000.”
This article has been reprinted with the kind permission of Chas Everitt International.
Barry Davies
011 801 2500, or visit
www.chaseveritt.com
Page Link: http://www.chaseveritt.com/html/press.html
What You Must Know About Your Managing Agent
One of the biggest growth areas in the real estate industry at the moment is the management of rental property on behalf of landlords – despite the fact that buy-to-let investments now only account for about 7% of property purchases, compared with about 25% in 2004.
“The main reason is that owners as well as tenants have come under increasing financial pressure in the past two years, and simply cannot afford to risk rental defaults,” says Berry Everitt, CEO of the Chas Everitt International property group.
“Many people still own several rental properties that they bought during the boom years and are in a situation where one bad payer could jeopardise their whole portfolio.
“But the most vulnerable in this respect are homeowners who, having found themselves in financial distress but unable to sell their properties in a soft market, are renting them out to cover their bond repayments while living somewhere cheaper themselves.”
Writing in the Property Signposts newsletter, Everitt notes that while falling interest rates have steadily reduced the incidence of non-payment or part-payment among tenants since last year, this is still around 20% (one in five) in most areas and income brackets, according to the latest Rental Payment Monitor compiled by TPN.
“In addition, low inflation and rising municipal service charges are going to make it very difficult for landlords to raise rents by much next year, which means that they will have little or no cushion if a tenant does default.”
In short, he says, the need and demand for expert help in managing rental properties is set to grow even more. However, there are some important things for owners to check before entrusting the management of their properties to an agent. These include:
- Ensuring that the agent is registered with the Estate Agency Affairs Board and has a trust account for holding tenant deposits;
- Ensuring that the agent is at least working towards obtaining an NQF4 or NQF5 qualification by the end of 2011, when these will become essential for an agent to practice legally;
- Ensuring that the agent has proper systems in place to check on the creditworthiness and payment history of prospective tenants, and will also establish that they are not currently under debt review;
- Ensuring that the agent will not under any circumstances hand over keys to the property until the deposit and first month’s rent have been paid; and
- Ensuring that there is a clear, written contract detailing exactly what services the agent will provide in return for his or her management fee – and whether this is a set amount or a percentage of the rent.
This article has been reprinted with the kind permission of Chas Everitt International.
Barry Davies
011 801 2500, or visit
www.chaseveritt.com
Page Link: http://www.chaseveritt.com/html/press.html
It’s safer to sell before you buy a new home
Many homeowners are looking at the upgrading opportunities presented by the current market and making offers to purchase bigger and better properties before they have even listed their existing homes for sale.
And there are of course certain advantages to buying a new home before you sell the old one, says Berry Everitt, CEO of the Chas Everitt International property group. These include the fact that you know where you’ll be living next, when you can take occupancy and how much you’ll be paying.
“Buying first also usually means you won’t have to move twice. Many repeat home buyers have had to move to an interim rental property because they couldn’t find a replacement home by the time they had to turn their existing home over to the new buyers.”
However, he says, this really may not be the wisest approach. “For a start, there’s a good chance that it will take longer to sell your existing home than you anticipated it would, and that you could end up being liable for two home loan instalments a month.
“Such double payments can add up remarkably quickly, and then you would probably feel pressurised to lower the price of your old home just to achieve a sale.”
Writing in the Property Signposts newsletter, Everitt says it is best to do some homework before making any decision. “Find out the current market value of your home from reputable estate agents in your area and quiz them about market conditions. Is it a buyer’s or a seller’s market in your suburb? In a hot seller’s market, the chances of a quick sale are much higher than in a soft buyer’s market.
“You should also establish whether there any problems with your home that could make it difficult to sell. Is it located across the street from a noisy school? Is it next to a busy freeway? Does it lack a garage or a second bathroom? Is the floor plan awkward?”
Armed with this information, he says, you will be better able to assess the risk of buying first. If it’s likely that your home will sell quickly, it may be worth the risk of buying before selling. But if the marketability of your home is questionable, you should really consider taking the more conservative route of selling before buying.
This article has been reprinted with the kind permission of Chas Everitt International.
Berry Everitt
011 801 2500
www.chaseveritt.com
Home Loan Help for the Self-Employed
Changing economic circumstances and new lifestyle expectations mean more and more people these days are self-employed, as business owners or as freelance specialists who work on contract for a series of clients.
But even though many of them are high earners, they often find it difficult to get home loans, thanks to the fact that most banks still regard them as higher risk borrowers than corporate or public sector employees.
However, if you are self-employed, you should not give up hope just yet, says Berry Everitt, CEO of the Chas Everitt International property group. “There are ways for entrepreneurs to improve their chances of being granted a loan, the first being to get advice from an experienced mortgage originator on what size loan to apply for and how to first resolve any credit record issues that could count against you.”
Secondly, he says, if you are self-employed you should not even think of applying for a home loan unless you have all your business and personal financial administration up to date. “Remember, applicants in ordinary employment can usually provide pay slips, and income can be further verified by contacting their employer. With self-employed applicants, there are no third parties to provide such verification so lenders have to fall back on other proofs of income – and indicators of the stability of that income.
“So before you get ready to fill out that bond application, you should assemble all the supporting documentation that is likely to be required, including your annual financial statements and tax assessments for the past three years, bank statements and a cash-flow summary for the past six months, the most recent three months’ management accounts and a copy of the lease if you rent your business premises.
“You will also need a certified copy of your ID, a letter from your accountant attesting to your monthly income and a statement of your domestic income and expenditure.”
Writing in the Property Signposts newsletter, Everitt also says you will greatly improve your chances of being granted a loan if you have cash available to pay a deposit of more than 10% of the purchase price of the property you would like to buy.
“Lenders are much more inclined to grant loans to those who demonstrate financial discipline by saving a deposit and come prepared to invest at least some money in their own properties.”
This article has been reprinted with the kind permission of Chas Everitt International.
Barry Davies
011 801 2500, or visit
www.chaseveritt.com
Page Link: http://www.chaseveritt.com/html/press.html
Most SA houses worth less than R500k
Johannesburg – More than half of South Africa’s six million residential properties registered in the Deeds Office are worth less than R500 000.
Currently, 3.5 million or 58% of these properties fall in the so-called affordable category – properties under R500 000 – 47% of which are in former townships. This emerged from new data from the Affordable Land and Housing Data Centre (al+hdc), which was announced on Wednesday.
This data centre is an initiative by the FinMark Trust, Urban LandMark, Lightstone and Eighty20. It is aimed at a comprehensive analysis of the market for affordable housing.
Although this market provides the overwhelming majority of accommodation in the country, it’s the market about which the least amount of information is available. The al+hdc is a database of properties in 2 400 residential areas, where the average property is worth under R500 000.
At current mortgage rates this housing would be affordable for households earning less than R16 000 a month – 88% of the country’s population.
This type of accommodation includes existing houses in former coloured, black and Indian townships, housing subsidised by the state, and new housing being developed by the private sector.
The affordable housing market is the market that is growing the fastest in terms of volume and value. More affordable homes worth less than R500 000 are being built each year than the more expensive houses.
Since 2004 an average of 70 000 new affordable units, including state-subsidised houses, have been registered at the Deeds Office per year, compared with 65 000 in the category of houses costing more than R500 000.
Although fewer new houses in the above-R500 000 market have been built since 2007, the figures have remained constant in the affordable housing market.
As far as housing finance is concerned, banks are very active in the affordable market – and the four big banks have taken the lead.
Absa has the biggest market share in terms of the number of mortgages granted to buyers in the affordable market, followed by Standard Bank, Nedbank and First National Bank (FNB).
But Standard Bank has the biggest market share based on the value of the properties, followed by Absa, Nedbank and FNB.
In all, 45% of properties worth between R250 000 and R500 000 in the affordable areas are financed by mortgages, compared with 63% of properties in the same price class in residential areas where the average price is above R500 000.
This article has been reprinted with the kind permission of Betterbond
Tel: 011 516 5500
Fax: 086 677 1162
Website: www.betterbond.co.za
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