LOOKING FOR A BOND SOLUTION?

After months of searching and visiting show houses, you have found the home you want to make your own.  Now what?  If this is the first time you are buying a home, the process may seem overwhelming.  How do you make sure that you are successful in your application for a bond?  How do you make sure that you get the best deal possible on an investment decision as important as your homeloan?  How do you even go about the process of applying for a bond?

Should you go it alone?

The information age has brought in an era of being able to do many things by yourself; things you would previously asked an expert to do.  Within minutes you can have detailed instructions on how to do virtually anything, often with a video to accompany the instructions.  Whilst this can be empowering, sometimes using expert advice and getting professional input is a better decision.  Applying for residential homeloans is one of those areas.

Why use the experts?

When you use a bond originator company that specialises in providing bond solutions, you can be assured that you will have the most favourable outcome possible with regard to your residential homeloans application.  There are a number of reasons for this:

1. They know what each bank requires

A Bond Originator knows what each bank requires.  By examining your application, they will know which banks it would be best to approach for your circumstances.  This will help ensure that you are successful.  Once you have set your heart on a property, you want to know that your bond application will go smoothly.

2. You don’t need to deal with the bank bureaucracy 

When you use a Bond Originator they will deal with the banks directly and will make sure that all requirements are met.  They have experience and expertise and know exactly what is required and who to speak to in order achieve a speedy result.

3. You get the best deal possible

A company providing residential homeloans can take advantage of bank corporate scheme arrangements.  This means that they are able to get you preferential rates and terms, better than those you would be able to arrange by yourself.  Getting the best interest rate possible is very important when you are taking out a loan with a repayment period of between 20 and 30 years.

4. You can access other financial products you may need for the purchase of your new home

The situation often arises when you are purchasing a home that you do not have access to the funds you need when you need them.  For example you may be waiting for the proceeds of the sale of your current house. This can take up to 90 days, and in the meantime you may need to pay transfer fees, deposits, or fees for rates and clearance certificates.

When you use a bond originator they can assist you to access a loan product like bridging finance.

5. You can get expert advice upfront

With a Bond Originator you can get expert advice upfront.  They have a number of calculators that can help you in your decisions.  You can assess what you can afford, what your monthly repayments would be, and how long it will take you to pay off your loan.

You can have a single point of contact, a professional that will assist you in the process and answer all of your questions.

6. It will not cost you anything

There is everything to gain when you use a bond originator.  There is no fee involved, and you have access to excellent advice.  The consultant will be your one point of contact for the process and will guide you throughout.  They will apply at all the institutions for which you qualify.  With their experience, they will also know where you are most likely to be successful.

When you are ready to take the next step and buy your own home, you will need a bond solution.  Rather than going through the process of approaching every financial institution yourself, why not use a bond originator?  With their experience and a good track record in securing affordable finance, the process will be quick and painless.  You will be guided on each step of the way.  It will result in the best possible financial deal available.

Wouldn’t it be nice if the hardest thing about buying a new home is deciding where to put your furniture?  With a bond originator like Homeloan Junction, finding a bond solution is easy.

OVERTRADING

Just to break from the usual property information as I did one blog ago, let’s talk about business and life.

Overtrading is not a well-known word for most people although, like Gearing, we often use it. It’s roots are in financial management so as bankers, we use it a lot. It applies to the tendency of a successful business to ramp up its turnover because it can and then fall over on cashflow. The reason is that increased turnover looks really good but increased debtors, stock and human resources bring about funding requirements that deplete facilities, and employees that require more cost and management focus. As a business partner of mine has explained often: “Businesses fail for two reasons, failure itself and success”.

The trick with business is to stage turnover increases according to available funds. In that way, you can bank an increase and then begin the process again once the stock and debtors have caught up. This staging enables the business to suss out the efficacy of the growth – is it fast enough, are our new debtors paying on time, are our stock suppliers happy and ready to support us with improved credit terms? There is so much to be said for staging increases in turnover. Perhaps the most important is facilities. Banks do not enjoy overtrading,  but they love cashflow [sometimes even more than profits]. You can arrange facilities in advance of, and more than, what is required. Having financial capacity from your own bank can avoid bad mistakes like having to pay investors in your business high interest rates because they know you need the money, and even worse, investors who demand shareholdings in the name of helping you grow. Such shareholding is very expensive in the long-run when a business is well-sold off the back of your hard work. It’s good to grow; it’s better to grow in proportion to your own funding requirements and resources.

But then, there is the Overtrading that is less described as such. In fact, I use some license with the term when I apply it to your personal circumstances. How does this work and what do we normally call it? Perhaps the most important question is what is its long-term impact on you and those you care about?

I attended a Mens’ Retreat and came upon the term: “Always On” guy. Know one…….. or two or three? In the front of the class with the perpetual response: “Pick me!” Always ready to say Yes and not willing to say No. Otherwise, always thinking up the “next big thing” and going for it. Not just going for it but fundamentally believing that he or she really can do it together with all the other things. We call it “personal bandwidth” and we think it is infinite as long as we’re “going for it”. Distraction and lack of focus are not terms in our vocabulary. We are excited by the hunt and determined to win for reasons we best understand – because we can, gotta stop the competition, need to leave something for the kids, have to make people happy, grow while the opportunity is there, more money is better than less money and retire young. So many reasons and sometimes, just our own innate drive and desire to achieve.

If you recognise yourself somewhere in the description, here is some advice for you:

1. FOCUS: In his book, Essentialism, Greg McKeown quotes the poet, Mary Olivier when she asks: 

“What is it you plan to do
With your one wild and precious life?”

In a hard read, he continues to force the issue of being an Essentialist. In becoming so, you do that one thing. It’s big and it’s challenging but it is the thing you have decided to do often, to the exclusion of many other things. The result is clean, uncluttered, directed, relatively calm Focus and Execution. At the heart of his treatise is that “you choose to do” one thing, and are not driven by “you have to do” many things for many reasons.

It is unarguably sensible.

2. PRIORITISE:

If you are a mere mortal like I am, the notion of “only one thing” may escape you.  There is so much to do and so many opportunities to grasp that you become busy. Really busy! “Rat Race” often slips off the tongue for those trapped in “doing”. If you identify, then do yourself at least half a favour and begin to prioritise your activities. Simple questions like: What must I do? What would I like to do? What can I do whilst I delegate to another who I manage? What makes sense to prioritise given limited resources [including, my time]? All valid questions that redirect thinking and therefore actions. I sometimes speak of de-complicating my life – taking all the things I must do, comparing them with what I want to do, finding the overlaps and then settling down to do as many as possible over time. Simplifying life and time.

3. PURPOSE:

Allied to the above, is purpose. In defining it, a sense of purpose becomes the mirror against which every opportunity is reflected. I often think of it as the white barriers on either side of a horse racecourse. When I’m within my Purpose [read: personal life goal; the objective of my life; why I’m here…if you wish], I’m running on the track from the start line to the finish line. But if something comes along that demands my attention, I find myself, metaphorically speaking, over the barrier – you know, that area where the cars park and the catering tents are pitched. Definitely no distinct course of direction, lots of obstacles and distractions; bad going at best. Found yourself there? Out of purpose doing stuff you were not made for? I suggest to you, that the time you take to discover your purpose will save you years of your life “over the white barrier”.

4. TIME MANAGEMENT:

No good blog on personal overtrading would be replete without mentioning time management. Think of this: we have diaries that ding when we have an appointment, Suri and My Google which tell you when to leave and which way to go, anniversary/birthday/special day reminders, instant internet access to global sites, all in the palm of our hands. But, but, we can’t manage our time. Bottom line, you can’t blame the tool, you can’t blame others so you must be to blame; soree for you. Jack Welsh said: “Take control of our life or someone else will”. No truer word has been spoken. I listened to Cape Talk the other day and they were talking about Money vs Time. It was very interesting to hear the heart-warming stories about Time and how people had changed their lifestyle and income to have more of it. I heard no one call in to say, “Get a life, money is more than important!” However, truth is the majority of those I know de facto, choose Money. Manage your time, or your time will manage you.

Serious stuff, you may say. But really, just consider the consequences. Focus on everything is focussed on nothing. Something gives – your relationships, your health, your finances, your sense of wellbeing – something gives. In his book, First Things First, the late Stephen Covey talks about what’s Urgent vs what’s Important. When everything is urgent – dropping the kids at school, being up to date on your emails, social media – beware that you are not missing or missing out on what’s important. Often what’s important is long-term. Building character in your children is important and a mission-to-adulthood application. But nothing takes its place in the finished product. Is that email seriously more important than eyeballing your child when they come home from school!?

Failure comes in many forms. Sometimes you just fail and maybe it wasn’t you but the thing or project just wasn’t due to succeed. Other times, stretched on the “too much” rack, failure just drifts in and out as your focus reflects that of a happy bumble bee; flitting from one flower to the next in the hope that some pollen transfers. Success is Focus X Determination nine times out of ten. Be careful that you don’t really believe that if you do everything something will succeed – you may just be the reason why that is not the case. I’ll never forget that in my mind-map when I left the bank for entrepreneurship, I had 33 things to do. Of all of them, only 1 worked successfully for our benefit and we tried them all – do you have any idea how much work that took? Just think about it, are you the same?

Enough said. If you’re Overtrading in your business or personal space, think about it. If you continue, as most seem to do, realise the consequences. If you think you should reconsider, think about that and use one of the ways discussed above to re-focus on what you can do properly, what will give you maximum bang for your buck, and what demands your energy because you want to give it your all.

Homeloan Junction says to each of you: Strength to your Arm and much Success!

Yours in Property

CREDIT VOLUMES

You know, I have been looking at the volumes of credit extension and am suitably impressed. Oh, you might say, that’s “glass half full” stuff. But you know the old story, if you “gave” me something a year ago or just after Nenegate, would I have taken it? A resounding, Yes!

So let’s dig a little deeper using ABSA’s Credit and Mortgage Advances Report as at end-August 2016 and the microcosm of ooba’s Origination Overview as at end-July 2016. Not entirely comparable, but good enough for us to make some points on growth in our industry.

Is the market declining? Yes it is. But if you took that feeling in your gut in December 2015 and as you watched the Rand/UKP exchange rate sail off into the sunset and turn just before R25, you will know what I’m referring to when I say, “I would take what we have now”.

According to ooba, their volume of applications is down 5.67% comparing the cumulative year-on-year [ie, Jan-July 2015 totals to the 2016 period] figures. In fairness, the rate of decrease has increased so that June 2016 compared with June 2015’s applications volume decrease is 17.87%. In round figures, the month of June 2016 is 18% less than the same time last year.

Now let’s look at ABSA’s analysis. You cannot compare the percentages as they are talking to Total Advances of lending but a few points relate to trends:

  • Growth in outstanding Secured credit balances for households showed a 3.1% growth up to end-July 2016. This number includes Instalment sales [read: car finance] which has negative growth. To that point, we know car sales and finance are declining rapidly.
  • Mortgage balance growth is rising 5.7% in July off 6% in June2016. This growth is after taking into account any capital injections into bonds and any increased payments. But it would also include any non-payment of mortgages but frankly, I don’t think the banks are  bleeding in this area at this stage compared with normal default ratios.
  • The great eye-opener is Unsecured lending. Growth per annum between 2010 and 2013 peaked as high as 30% but since then, it has plummeted through 0% to about -8% to date. The unsecured lenders are also experiencing dramatic bad debt levels as the consumers try to repay their personal loans.

Given the figures of ooba and the advances growth of Mortgage balances, if you had said to me that’s it for July in January 2016, I’m still telling you, I would have taken it. Not sure if you agree?

So where are we at? South Africa is not accustomed to long periods of 0% growth in the economy.  There is really no excuse. Of course it’s better than negative growth and hugely better than the gut-wrenching collapse of 2008-2010, the infamous Sub-Prime Crisis [for which, to the best of my knowledge, no one has been prosecuted – given that the rip-off took place inside the law!]. But no-growth is akin to oxygen deprivation – you don’t feel it initially but it slowly takes hold and weakens you. We have just had a 3.2% growth reported and what an injection of fresh clean air! Don’t hold your breath though, we’re told, as it was just a statistical aberration. And some good news is coming out of China recently. Just for it’s size and perception of good news, that is good news. Another good news element is the fact that the National Credit Regulator’s enhanced credit criteria are curbing reckless lending to the point that only responsible lending to sustainably employed people can occur. Very good news for the consumers but then you just need to watch for rogue lenders cropping up again.

It is true that only Politics now bedevils the economy. Affecting Confidence we know is a hammer blow to growth. It saddens me that the sale of Tekkietown to Steinhoff, as one example, now has its expansion plans in Poland. This is great for the shareholders, but what a tragedy for South Africa and Southern Africa. What a powerhouse we fly over to do business in a business-friendly, fast-growing economy!

All that said, growth is growth and we’ll take it at any level. And it seems USA will not be raising its interest rates too soon. We’ll take that as well.

A closing point really close to home. Homeloan Junction’s performance has been beating the trends. If you look at August-on-August, applications have dropped by 3. You read right, just 3 applications. And then, if you look at July 2016 to August 2016, applications, coming out of Winter, increased by 75. That is really good and a testimony to the whole team who are putting heart and soul into their work effort. Very well done!!

We include this information only to say: It can be done! If you internalise, or the popular word, “mentalise”, everything you hear or read, you may be convinced you don’t have a chance. The day you are, you don’t. Henry Ford again to remind us: “If you think you can or you think you can’t, you’re right.” Always remain positive and determined to succeed. Things could have been catastrophic and they have not been. Let’s trust the market can take any other shocks that may be thrown at us this year.

Yours in Property

How can you pay off your home loan faster?

The process of buying a home, especially a first home, is exciting and scary at the same time. South Africans can get caught up in the hype of affordable residential home loans based solely on the monthly payment. When you only factor in the monthly outlay and mentally dismiss the total cost of a home, you do yourself a disservice.

The good news is that disclosure laws are in place to protect you and you have your estate agent available for guidance. Best of all, when you secure a home loan through Homeloan Junction, you get the best possible deal.

  • Our experts guide clients through the application process, explaining everything as you go along.
  • Homeloan Junction submits applications to 9 different banks. You just have to choose which deal suits you best.
  • We are experienced in negotiating with the banks on your behalf to get the best rates.
  • You are relieved of replicating all the paperwork.
  • You will know the monthly payment and you will also know the total cost over 20 or 30 years at various interest rates, so you can choose wisely.

By the time you actually sign the final paperwork your mind may be in a whirl. You just want to get through the signing, get the key and go home. You need time to let the meaning of it all settle in.

It’s time to take another look

When all is said and done, your residential home loan is an investment.  Life gets busy and paperwork gets buried. Still, you need to periodically review your loan terms. You need to track what kind of return you are getting on this investment and improve that return if possible. You also need to know if your investment has turned into a liability. Listed are a few markers to check:

  1. Do the maths and find out how much you have paid to date toward interest and how much to principal? You may be surprised. If you need one, your lender will provide an amortisation schedule so you can track these amounts by month.
  2. Get a list of all similar properties that have sold in the last 90 days. Your estate agent can help with that. This will give you an idea of what the market value of your home is today.

    – Hopefully it is worth more than your total home loan balance so you are making money.  If you sold now, you would realise some profit.
    – A drop in value is cause for concern because your investment has turned into a liability. You would lose money if you sold now.
    – If there is no movement up or down, you are safe for now. You are not making money but you are not losing either. If you had to sell you could expect to break even.

  3. Subtract your home loan principal balance from the total loan balance. That number could be another surprise but that is what it is costing you to borrow the money to buy the house.
  4. If property values do not increase over the term of your loan, your profit will be absorbed by loan fees. Shorten the loan term to save your profits.
  5. Since interest is figured on a daily loan balance, the faster you lower the balance the shorter the loan term. Shorten the term by paying more toward principal each month.

Shorten the term of residential home loans

There are several ways to shorten the term of your home loan so you pay less for your home. Any amount you pay above your monthly payment goes directly onto your principal.

  • If you pay off another loan, like credit cards, student loans or vehicle financing, divert that money toward your home loan every month. You will cut your loan term by years. That is a lot of interest you will not be paying!
  • Make home loan repayment a top priority. Know exactly how much you are paying for your house if you do not make extra payments. Then, commit an additional, firm amount each month. Do the maths to find out how much you will be saving on the purchase price of your house.  The numbers could be big.

The simple truth is any extra money South Africans put toward the principal payment shortens the loan term and saves money on interest. People are always tempted to use extra money for nonessentials. That is why you have to make a loan payoff plan and stick to it. Rather than wasting the money, plan what you can do with the significant savings. You’ll be amazed by how much you can save if you pay your residential home loan five or ten years sooner than scheduled.