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What’s Trending In SA Property?

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The only constant thing about life is that it is never constant … and this is even true of property trends. Here in South Africa, we have experienced the opportunities that come with an economic boom, and stumbled on during a recession, so what now in 2016… and how do current trends affect your chances of securing a residential home loan?

The experts in the property world have varying opinions and expectations of what the market will be doing from here onwards. Their reasons for how the market has behaved in the recent past show as many discrepancies. So who to believe?  The Internet gives you plenty of access to information and opinion from well-informed estate agencies and property guru’s, but in the end you will have to choose to follow advice from those you trust.

A Little History 

It’s all been a bit of an economic roller coaster. The boom period preceding 2008 was wonderful for sellers, buyers and those in the property business. Equally delighted were the banks and financial houses as they were happy to grant residential home loans as South Africa’s interest rates were at an all time low. With the interest low, many people who previously could not afford the repayments of a residential home loan now qualified – although many viewed this easy credit as reckless lending.

A down trend followed with 2012 reflecting the start of a little relief, and an upward movement in the property market.  Fast forward to December 2015 and the economic disaster South Africans experienced overnight – so what to expect for this year?

What to Expect in 2016?

First-time home buyers seem to be driving the property market and the good news is that should this continue, we can hope to see a slow and small growth in the price of properties as the demand for properties remains. There is a twist to the good news, however, as this will be pertinent only to certain areas of the property market. The metro areas throughout South Africa have seen home prices rise – Santon, Umhlanga and Cape Town – and look to continue being popular.

The Atlantic Seaboard has always enjoyed rising property prices and the feeling is that their upward trend will continue – albeit slowly – as prices are still considered to be undervalued in this area. The fall in the value of the rand to the dollar is an attractive incentive for overseas purchasers.

One will not be criticised for being cautious, as the general opinion is that the residential home loan and property situation will have a very slow start in 2016. The shortage of property to sell will warrant that the prices of homes continue on a gentle upward climb.

Residential Home Loans – Why Go it Alone?

Although being careful, banking institutions are still looking to finance potential homeowners. This is evident in the larger value of the bonds being extended and a reduction amount of the deposit required. If you are a buyer and you are looking to purchase a home, being aware of popular trends makes sense. Most estate agents are willing to talk to you and walk you through all the pros and cons of making the decision of where and what to buy. Every potential homeowner has unique requirements and being able to discuss these with an experienced agent is always helpful.

An advantage to deciding on a property to purchase is to pre-qualify for a residential homeloan. Qualified estate agents and home loan originators work closely to ensure you receive exceptional service and advice. At Homeloan Junction, we will assist you with all the paperwork when you apply for home finance and our service comes at no cost to you.

You are under no obligation and we will make sure that you receive the best possible deal from the 9 different banks we approach on your behalf. Our experience and relationship with financial institutes will work to your advantage. This pre-qualification will allow you to gauge your credit rating and realise which price bracket the property you can afford falls into.

The Move is Towards…

Living close to CBD’s, sectional title developments, flats, apartments and complexes is the way things are moving. High density city areas are proving to be the most popular areas for buyers in the market today. Cutting costs on the size of your home, travel expenses and finding advantages in density living is the tendency today.

The tough economic forecast and the rising cost of living that South Africans face, coupled with higher interest rates and a shortage of sought after stock is the test for the 2016 property market.

Go Big or Go Home

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A bond repayment calculator makes light work of trying to work out what monthly repayments will be required when taking out a bond. It certainly beats frantically scribbling down numbers and firmly thumping your calculator while your blood pressure rises!

Everyone’s dream is to own their own home, but you need to make sure that you can afford the monthly repayments before you take on such a big financial commitment. Mortgage repayments can change from time to time if the interest rate is linked to the prime rate. A financial provider is sometimes agreeable to a fixed interest rate, if this is what you favour. Terms of a home loan are flexible and range from between 20 to 30 years. As this is an extensive time period, one should carefully calculate the affordability of the loan amount you settle for.

To help home owners get the feel of the responsibility attached to taking out a loan we have a bond repayment calculator on our website. This is a tool which bond originators supply to assist a prospective homeowner like you to calculate various mortgage repayments.

Bond Affordability Calculator

A bond repayment calculator will work out the size of the bond you qualify to apply for. By visiting our website you will be able to get an idea of what bond repayments you can afford each month. There are many factors that come into play and which can affect the bond you are offered. The general idea is that the higher your salary, the larger the bond you would qualify for.

However, a person earning a large-numbered salary but having many obligations (debts) could find that they qualify for a smaller mortgage than another applicant earning considerably less but with no serious commitments. This is called the DTI ratio (Debt-To-Income) and is used to calculate how much ‘extra money’ one has after monthly expenses are accounted for. Every person has unique circumstances and requirements and we will treat each application with these distinctive factors in mind.

Bond Repayment Calculator 

What portion of your salary should you spend on a bond each month? This is another situation which will rely purely on individual circumstances.

  • The traditional rule of thumb consideration is mortgage repayments should be no more than 30% of your pre-tax salary. Another conservative view is that it should be not be in excess of 25% of your take home salary.
  • Most banks prefer a deposit before granting a home loan as 100% loans are hard to qualify for.
  • The calculator will give you an idea of what your monthly repayments could be. A different interest rate will alter your monthly payment as will the time period in which you chose to pay it.
  • By paying back more than the stipulated amount, an exceptional difference in the eventual time and amount your home will cost you.
  • We suggest you to play around with numbers on our bond repayment calculator and have your questions ready for us to help you answer.

The Big Picture

Sound advice is to take into account the whole of your housing obligation and not only the mortgage. Your housing budget should include your bond repayment, municipal rates and taxes and home insurance. Do not be drawn into over-extending yourself as what seems affordable today could be very uncomfortable down the line. Children grow up, educational costs increase and perhaps supporting a parent will come into the equation, not to mention maintenance and repairs.

This is a long-term commitment and it is wise to consider all factors. Research residential areas before deciding on a home that is affordable.  Where is there expected growth? Will the location work for the family’s needs?

Place the purchase price, years you are planning to repay the bond in, current interest rate and your expected deposit amount into the bond repayment calculator to get the big picture on what the real monthly mortgage costs will be. Homeloan Junction has a separate calculator to help you ascertain your bond and transfer costs.

Loan – To – Value Ratio (LTV)

Giving financial assistance to home buyers is a risk for the lenders. They want to be sure that their money is repaid, with interest of course, and in the event of any unfortunate circumstances that they are not the ones to lose financially. Therefore the bond you are granted will also be linked to the property you wish to purchase: what it is valued at and what the asking price is. Being able to recover their money is an important consideration.

Smart Thinking

Being cautious does not mean doom and gloom and your dreams flying out the window. Perhaps a little trade-off is all that is needed: buy a smaller home that can accommodate renovations or alterations at a later stage. The cheapest house in the best neighbourhood is an alternative view as you cannot over capitalise and all improvements will add value to your home. Do you have to buy a small home in the newest trendy area? Think about the well-established areas with older homes that have huge rooms, established gardens but need just a little tweaking to make them your dream home.

Use our online bond repayment calculator to see where you stand, and contact us for expert consultation on applying for your homeloan. You can go big on your dreams and go home with the help of Homeloan Junction.

Your in Property

Vincent

How to pay off your home loan faster

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Does the thought of twenty or thirty years of home loan repayments put you off buying a home? Even your dream home can start to look less dreamy when you’re faced with what looks like a life sentence of hefty monthly repayments. But what if there was a way to reduce this period … and reduce the total amount?

Buying a home is one the biggest financial investments most of us will make, yet how many of us are aware that small additional payments on your home loan can have a major impact on the final amount you will end up paying for your home? The biggest burden facing homeowners with a bond is the interest they will pay over a 20 or 30 year period.

Say you take a R1 million home loan over 20 years, no deposit and at the current prime lending rate of 9.5%;  you will end up paying R2 237 115 for your home. That’s enough to give anyone grey hair! But, before you lose heart, there are a number of steps you can take to pay your bond off faster … and significantly reduce that final figure!

Take a look at these 5 clever ways to bring down your home loan repayments:

Pay your salary into your Bond

I know it might sound strange, but as long as you have an access account enabled on your bond you can actually pay your salary into your home loan every month and then simply transfer out money needed for debit orders and day to day spending when you need it.

Here are the advantages of doing this:

– Benefit from lower interest rates applicable to the outstanding amount on your home loan
– Inadvertently use your home loan account as a savings account and pay off your home loan faster

Make Additional Payments

Fast track the repayment of your home loan by putting any surplus cash, like your bonus cheque or SARS refund, you have into your bond. Yes, this does require discipline and a measure of sacrifice but the long-term gain on your home loan is well worth it. Take for example, an additional R1200 paid towards your R1 million home loan every month, over and above the monthly instalment (R9 321 in this case) owed, and you’re looking at saving R374 344 in interest … and cutting your repayment period down to 14.75 years.

 Put Down a Deposit

If you are still in the planning phase of purchasing a home, consider putting down a deposit rather than taking a 100% bond. The bigger the deposit you’re able to put down, the smaller your home loan and the less interest you will pay. On a R1 million home, a deposit of R120 000 will reduce the interest you owe on the outstanding capital to R1 088 661. That is a straight up saving of R268 454 before you’ve even considered taking any of the additional actions discussed above. Calculate how much a deposit can save you, by viewing our Bond Repayment Calculator.

Ignore Rate Fluctuations

While you have no choice but to make increased monthly instalments should the prime lending rate increase, heaven forbid, it is a wise choice to keep your instalments steady in the event the rate decreases as this gives you an automatic gain on your bond. You’re already committed to paying a certain instalment so sticking to this amount should the rate drop gives you an added advantage in paying off your home loan that much faster.

Explore Your Home Loan Options

It doesn’t hurt to explore your options in order to secure an even better rate on your bond. Talk to a bond originator like Homeloan Junction. If you have a good repayment track record and credit history, who knows, they may just be able to negotiate a reduced interest rate. Even a 0.5% reduction can represent a significant saving; that is R77 773 saved on a R1 million bond over 20 years with no deposit down. Should you decide to switch home loan providers, be sure that the cancellation and penalty fees you’ll inevitably be charged will not outweigh your prospective savings.

As you can see, a little commitment and discipline can go a long way to alleviating the burden of your bond. And at the end of the day, paying off your bond faster and reducing the amount of interest you owe on your home loan translates to money in your pocket. This can be used towards your retirement, your children’s university fees, a world cruise or perhaps an investment property.

Yours in Property

Vincent