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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

Take control of your monthly expenses today! [Free HLJ Budget Tool]

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Funny how things happen at the same time!

In this post we will give you our Homeloan Junction Budget Tool and refer to a Moneyweb Today article. The Moneyweb post arrived just as I put the finishing touches to the HLJ Budget Tool. Serendipitous, I would say!

So why the Tool?

Most of us don’t have a budget. We live from hand-to-mouth, month-to-month and while away our time and our money on necessities and fancies. The danger is that as this forms a habit pattern, we wonder where the money’s gone and why there’s so much month. Month after month, year after year, we live as if there is no tomorrow financially. Often, if we’re really honest with ourselves, we take on bad habits in the process – we eat, drink and smoke too much. After all, life is stressful, you know. Then, we may rack up some unexpected medical bills in the process as we get older. All part of life, you know.

6% of South Africans can retire comfortably. In case you wonder about the other 94%, they don’t retire comfortably by level of degree.

What we mean by that is that the next 6 % below the “comfortable 6%”, live a little less than “comfortable”. Starting to experience the world of retirement myself a little, I have family in their 80’s. Retired since age 58, 25 years later they’re finding prices very high. Thank Goodness, they have not squandered their money but things are tight – much tighter than when they retired.

What we learn from this is that retiring with income that rises, or is supplemented with assets that may be sold, is wise financial planning. So, the next 6% behind the second 6%, is probably already not ready to retire at all in South Africa; of a truth, the situation quickly becomes dire and a Government pension of about R1600 per month, rising at 6-7% per annum, does not satisfy even basic needs.

Everything in our beautiful, tortured country points to sadness as we ponder these thoughts. My wife read me an article the other day that said one of the greatest gifts you can give your children is to not be a burden to them in your retirement. Oh may that be a simple goal for you when you finish reading this blog!

Get the full Moneyweb article here – MONEYWEB-TODAY-ARTICLE.pdf

Using elementary Excel, I have created a Tool for you to budget. Customise it for your own circumstances and please note that the numbers are just examples, so put your own in.The Tool allows for your Gross Income. It then deducts your direct expenses like UIF, Income Tax etc to arrive at your Net Income Before Expenses.

Then it deducts two kinds of Expenses: Need To Have’s and Want To Have’s. Call them what you want and re-arrange the items as you wish [after all, we need a little retail therapy or entertainment some time J] but just be true to yourself. Question what you earn and what you spend honestly. Commission earners especially project their earnings – like true sales people, they often believe they are going to earn more and spend less than they really do over the long-run. Don’t fool yourself. And, if you really want to test your reality, then commit to an extra amount repaid monthly on your bond and see how good you are at sticking at it.

You can download your copy of this tool here –HLJ-Budget-Tool.xls 

The point is, every few hundred Rands you save in this exercise could literally put you into the top 6% at retirement. And, keep you there.

 Now to the final points……….

1. I am not a financial advisor, so speak to yours and begin to commit to a long-term savings plan. Retirement Annuities, Satrix, DBX’s etc are great vehicles to discipline your savings. And, by the way, remember some Life and Disability cover for those you love, if you don’t make it.

I have tried to teach all financial levels of people the simple fact of compounded interest. By the way, Albert Einstein called it his “most profound” learning. Two elements for now:

  • R100 invested for 10 years and 20 years at 8% is R18294.60 and R58902.04 respectively. The compounding is not a straight line as interest on interest continues to kick in the more you save.
  • The inverse of this, which the Insurance industry correctly calls “the cost of delay”, is that if you want R60000 , then the faster you start saving the less you have to save. R60000 costs you R101.86 over 20 years and R327.97 over 10 years, both at 8%.

2. I am a banker, so back to the tired old truth that your bond is a good place to save. Whatever interest you save is at your bond rate after tax.

For example, at a bond rate of 10%:

Bond: R80000
Years to go: 20
Repayment: R7720.17
Total Paid: R1852841.56
Interest spent: R1052841.56
Payment increase of 20%: R9264.21
Years to pay: 12.83 years
Total paid: R1426688.00

Original total payment less new total payment: R1852841.56-R1426688.00 = R426153.56

SAVING AFTER TAX: R426153.56

Homeloan Junction cares. This blog may seem trite and simplistic to some. To others, it may just be the spark of new financial life. If it touches one life today then the last two hours writing and calculating has been worth every minute.

Yours in Property