Oct
2012
Generally, most people’s biggest long-term debt will be their home loan. And while property prices may fluctuate randomly, you do have control over which home loan you choose to finance the purchase of your house. It is imperative that you select the loan with the options and benefits that suit your needs and your pocket the best.
In the current economic climate many people believe that they will not be able to afford to buy a house, but this is not necessarily true. With the lower house prices and increase in bank repossessed property, buyers may well be able to afford the home of their dreams if they are smart about financing their loan.
Every home buyer is unique. They earn different incomes, different levels of debt and different sized families and needs for that family.
First, you will need to decide through what channel you will most effectively be able to do your loan application. Loan consultants from your bank will personally process your application and you will have access to any of the bank’s financing information you may require. One could also apply online which is a quick and efficient method of applying for finance, but lacks the individual attention and information that may be needed at a later stage. Mortgage originators act as agents for multiple banks, and will submit your application to several banks to ensure you get the best deal. Buyers can contact MyRoof to help them apply for financing in this way. The trained bond consultants will guide you through the process and submit your application to Standard Bank, Absa and FNB.
Next, buyers will have to consider the capital amount they will be able to invest as well as determine how much financing they will qualify for. It is useful to determine your credit-worthiness as well as the loan amount you qualify for before you go house- hunting. It is also important to determine whether the financing institution will allow you to add the transfer and bond costs to the loan amount, since some lenders may require you to use a separate facility for this.
One of the most crucial factors to consider when deciding on a home loan is the interest rate payable on the loan amount. There are generally three types of interest options to choose from. A standard variable rate applies the lender’s fluctuating mortgage rate to your loan. Usually this is the same as the prime rate as determined by the Reserve Bank. A fixed interest rate is just that – a rate that remains fixed for a certain period of the loan, and may be slightly higher or lower than the current variable rate. A fixed interest rate affords buyer stability with regards to their monthly repayments as the amount remains unchanged. Some lenders may also be willing to negotiate the interest rate and may allow discounts.
When applying for financing buyers must also consider the bond registration costs. The institution providing your financing will appoint a conveyancing firm which will then register your bond, so it is important to obtain an estimate from the lender of what charges you can expect for this. The conveyancing fee will also include the Deed’s Office registration cost. Buyers can also expect to pay VAT on top of these conveyancing fees. Should you obtain your financing from a bank also remember that bank charges will be payable. Inspection and valuation charges will also form part of this cost and are usually paid to the conveyancer directly.
When choosing a home loan also consider the number and cost of the policies that the lender will require you to take out. All financial loan providers expect buyers to take out a short-term insurance policy – one that is usually renewable annually – in order to protect the property and building against unavoidable damage. This premium will be debited to your account monthly. Lenders often offer life policies that cover the owner during the bond’s life span. It is generally not compulsory to take out such a policy though. However, it is in your own best interest to have an independently provided life policy to cover the bond in the event of your death, and that will also continue after your bond has been paid off.
Browse for package deals. Quite often, loan providers will offer you package deals. For instance if you take out a home loan with them your payments and rates will be reduced provided you also sign up for a credit card or cheque account with them. South African banking systems are also phasing in All-In-One accounts, which have proved very successful in the Australian banking world. These accounts combine your home loan and cheque account in order to reduce interest payments while the cheque account retains any credit.
Loan providers often insist that monthly instalments are paid via debit order to simplify the process of payment. It is essential that you find out if there is a significant penalty for early repayment on the loan, as some lenders insist on extra interest being paid should you settle your loan account prematurely. It is essential that you are aware of these policies before you sign a loan agreement. Remember though that you are entitled to make payments at any point during the bond’s duration in order to reduce the outstanding debt amount. You will also not be liable for any penalties provided you don’t pay the total loan amount off within three years.
The best bonds are generally those that are flexible and can grow with you and your family, because the general bond repayment period is 20 years and your financial situation is likely to change throughout that time
Contact MyRoof today to apply for bond financing!
