Debt consolidation loans – Advantages and Benefits

August 29, 2007

South African consumers are swimming in a sea of debt. Currently consumer credit to households is estimated at R760bn with 14 million active credit consumers and 50 million open accounts. The average % of debt to income is 73%. There are 80,000 judgments for debt per month.

Making the minimum payment on all your credit cards, mortgage and personal loans will not cut it. The compounding of interest (interest on interest) is working against you and some day, you will find yourself in a big financial hole if you do not do something about it

Therefore consumers are turning to debt consolidation loans, attracted by the benefits and advantages these loans have to offer. Lets discuss some of the possible advantages of a debt consolidation

Single Payment
Most consumers prefers to make a single payment instead of having to make payments to several creditors.
This way, you can do away with the damaging effects of dealing with unmanageable debts. A debt consolidation loan will help you bring your entire debts under one umbrella. Keeping track of your money will not be difficult.

Interest Rate Reduction
A major benefit of debt consolidation loans are due to the fact that the interest rates are half to one-third the interest charged for revolving credit card accounts. Debt consolidation loans are secured loans – meaning your home is used as collateral while borrowing money. This reduction in interest rate turns out to be a blessing for consumers.

Monthly Admin Fees Savings
By consolidating your debt, you are not only saving on the overall interest rate, but you are also saving on all your monthly charges for all your separate account. This can be substantial if you take into account all the monthly administration charges for your bond, overdraft, loan, car repayments etc.

Low Monthly Payments
You eliminate all your high interest debt when you consolidate your debt. You will now be making a low monthly payment on your debt consolidation loan and this is the only loan you need to worry and pay off.

However, before jumping into debt consolidation loans, you should do some calculations first on the interest you are paying on your current credit card and personal loan accounts and then check how much you will be saving by getting a debt consolidation loan. Next you should plan to use these savings (interest) to pay off your debt consolidation loan as soon as possible, to maximize savings.

Tax Free Investment
The best investment you can make is to repay high interest debt. The return on this investment will be in excess of 20% on credit card debt, for example, and that return is tax free. Fund managers who have achieved the same rate of return for their clients the past year are very few and far between.

For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za

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The Bond Financing Process

August 26, 2007

Day 1: Submit an application through your bond broker

  • Bond Broker pre-qualifies client for loan.
  • Request and motivate for rate discounts for clients from various financial institutions.
  • Contacts client with results and client makes a preliminary decision on lender of choice.
  • Bond Broker submit fully completed application with supporting documents to financial institution.
  • Bond Broker awaits AIP (approval in principle) or decline notification from financial institution.
  • Approval in Principle – Client is approved subject property valuation.
  • Decline – Clients application declined due to various factors.

Day 2-5: AIP (approval in principle) issued

  • Credit department verifies information and does credit checks.
  • Bond Broker receives AIP or decline notification.
  • AIP (approval in principle) – client is approved subject to a valuation to be done on property. This is not a final approval.
  • Decline – Client’s application declined due to a variety of reasons. Bond Broker will reassess application for further assistance.
  • Bond Broker informs client of decision.

Day 7-8: Formal Quotation

  • A property assessment (valuation) is completed by the bank – the valuation takes place either physically or through a so-called desktop valuation.
  • The bank will send a formal QUOTATION (final approval) through to the Bond Broker, the estate agent and the client.
  • The Bond Broker informs client and explains all the details of the quotation. The client then accepts or rejects the quotation.
  • The bank will forward the loan agreement to the attorneys and instruct the Registering attorney to attend to the registration of the bond.

Day 10-12: At the attorneys

  • The home loan bond documents are prepared.
  • Client contacted by attorneys to come and sign documents.
  • Required to pay transfer duty and other costs.
  • Attorney lodges transaction with Deeds Office.
  • Registration attorney confirms registration to buyer and to the bank.
  • Seller’s bond cancelled (if applicable) and settled.

Day 15-18 : At the bank

  • The attorney will advise bank of registration.
  • The bank will disburse the money.
  • The transferring attorney will advise client that the property has been registered in their name.
  • Bank will confirm monthly installment due in writing.
  • First monthly installment due within 30 days of registration date.
  • The Title Deed & home loan document sent from the attorney to the bank for safekeeping.
  • With the new National Credit Act this process can take up to 3 months and longer. See factors that delay registration.

The legal stuff

Phase 1 : The Transfer Attorney

  • The seller informs the Transferring Attorney to attend to the transfer of ownership of the property into the buyer’s name.
  • The transferring attorney will request the title deed and cancellation figures from the seller’s existing bank (if applicable).
  • A Rates Clearance Certificate will be requested from the local authority. No transfer is possible without such a certificate.=

Phase 2 : The Bond Attorney

  • When the bank approves the buyer’s loan and instruction will be issued to the Bond Attorney to attend to the registration of the bond.
  • The Bond attorney informs the Transfer Attorney of the amount available for guarantees and requests the draft Deed of Transfer.
  • This Deed of Transfer is necessary to get details about the purchase price, title conditions etc.

Phase 3 : The Cancellation Attorney

  • The Cancellation Attorney is instructed to cancel the seller’s home loan upon receipt of a guarantee for the amount owing.

Phase 4 : The Transfer Attorney

  • The Transfer Attorney receives the Title Deed and cancellation figures and sends a copy of the deed of transfer and the guarantee requirements to the Bond Attorney.
  • The Transfer Attorney will contact the buyer and seller to sign the transfer documents.
  • The buyer pays the transfer costs and the Transfer Attorney then pays the rates and taxes and the transfer duty.

Phase 5 : The Bond Attorney

  • The Bond Attorney prepares the home loan documents. The buyer signs the relevant documentation and pays the bond registration costs.
  • The Bond Attorney then issues the necessary guarantees and forwards them to the Transfer Attorney who prepares the mortgage bond documents for lodgment with the Deeds Office.

Phase 6 : The Transfer Attorney

  • Once the Transfer Attorney has received the guarantees, he will forward it to the Cancellation Attorney, who (cancellation attorney) in turn obtains consent from the seller’s bank for home loan cancellation.
  • Once all the documentation has been signed and the all the costs involved settled then the process can be finalized.
  • The Transfer Attorney contacts the Bond and Cancellation Attorney to lodge all documents simultaneously with the Deeds Office.
  • The documents includes the: home loan cancellation, transfer and new home loan documents.
  • The transfer Attorney attends to the registration of transfer of the property while the Cancellation Attorney attends to the cancellation of the existing bond of the seller and the Bond Attorney on the other hand sees to the registration of the new bond.

Phase 7 : The Deeds Office

  • The set of three registrations which has been submitted simultaneously and after being examined by the examiners in the Deeds Office, placed on preparation where the attorneys attend to any notes made by the examiners in respect of the documents.
  • This takes 10-14 working days.
  • On the day of registration the bank pays out the loan according to the guarantees issued.
  • Agent’s commission is paid to the estate agent.
  • The Transfer Attorney then forwards the Title Deed to the Bond Attorney/Bond holder who retains the same together with the registered bond document as secured.

LEGAL COSTS

You will be liable for the following costs:

  • A bank valuation and initiation fee.
  • Transfer costs (transfer duty, conveyance fees and stamp duty etc. to the transferring attorney for transferring the property into your name.
  • Bond registration fees which you must pay to the attorney registering your bond

Save on Legal Fees

For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za


    The 12 Most Common Mistakes New Home Buyers Make (part three)

    August 21, 2007

    On to the final part of this three part blog entry…

    8. Not Negotiating Hard Enough on Price

    Obviously your ability to negotiate the best price on a property will vary depending on your current market’s conditions. A buyer’s market means that there is more supply than demand and therefore buyers have the upper hand. A seller’s market is just the reverse.

    Regardless of the market, however, you can usually negotiate a better price if you will follow the steps previously stated. These steps will give you the information and positioning necessary to approach the negotiation process fully prepared. You should also be careful when offering a certain price and terms for the property not to give any indication that you will go higher. This is the time when a poker face is extremely useful and keeping your excitement in check is critical. Just remember that every rand you save on price will save you 2 ½ to 3 times that amount in mortgage payments.

    9. Not Negotiating For Extras

    This is another opportunity that is often lost during the negotiation process. That is the opportunity to save money on items you will need to buy if you don’t have them (such as a refrigerator, lawn mower, etc.) or to get goodies you would not normally buy (such as a hot tub or sauna). Many of these items can be had simply for the asking.

    Many home sellers don’t want to take the time and effort to have to move the larger items and often they are looking for an excuse to buy something new. Whether they are or not, it can’t hurt to ask. These types of items make good bargaining chips and the worst they can do is say no.

    10. Not Following Up On Contract Stipulations

    When negotiating the purchase of a property there will often be items (such as repairs, etc.) that the seller agrees to take care of prior to closing. It is a mistake to simply assume these have been taken care of and not check on them prior to closing.

    Make sure to do a final walk-through of the property well before the closing date. Bring along a list of all the items that were agreed to and check them off as you go. It’s not a bad idea during the negotiation process to agree to an amount to be held in escrow at closing if the items are not taken care of. This will give the Seller motivation to make sure they are completed and will avoid delays in closing if they are not.

    11. Hidden Expenses

    It’s no fun to get to the closing table and find out that the costs of completing the transaction are higher then you thought. If inspectors, surveyors, etc. have agreed to be paid at closing make sure you know what their charges will be and get it in writing. The same is true of your lender. Your lender should be able to provide a detailed estimate in writing of all expenses to expect in originating your new loan. Be sure and bring these items to closing and compare them. No lender can be exact down to the penny in estimating these costs but a good lender should be pretty close.

    12. Rushing The Closing or The Escrow Period

    Nobody likes surprises when it comes time to close. Moving is one of the most stressful times in peoples lives so both the Seller and you as the Buyer are going to be more emotionally “uptight” then normal. The best way to minimize the stress is to expect some bumps along the way and give yourself time to deal with these challenges as they appear. Make sure to set reasonable time frames for items to be accomplished then hold to your schedule as much as possible. Ask your lender to have all the documents available for review a day prior to closing. Check them out carefully to make sure the costs on the settlement statement are in line with what you expected and that the terms of the loan (i.e. interest rate, fixed or variable, term, prepayment penalties, etc.) are what you agreed to. This way if you do find a discrepancy you will be able to deal with it without feeling under the gun and there will be time to fix it before it becomes a problem.

    So, what to do next?

    Well, I know that is a lot for you to take in so I am happy to spend some time with you and answer any questions you have about the process of buying your new home. You are welcome to call my office at 086 110 6204 during business hours. Or visit this website for more information

    Or, of course, you can do nothing, throw this letter away and continue paying rent wondering what it would be like to own the house you’ve always wanted and watching the price of homes continue to rise. Instead, if it’s time to make a change in your life, let me help you avoid the possible pitfalls and make smooth transition into your new home.


    The 12 Most Common Mistakes New Home Buyers Make (part two)

    August 14, 2007

    4. Taking Your Credit For Granted

    Unfortunately you may be reading this report too late to have kept from making this mistake but it is never too late to start improving your credit rating. In the last few years the way lending decisions are made has become much more automated. And the way the decisions are made has changed dramatically. For the most part decisions are made based on certain guidelines and not left up to subjective humans.

    This places more and more importance on your credit rating when applying for a loan. How good your credit rating or “scores” are depends on several factors such as: Current credit balances, Amount of current available credit, Late payments (How many, How late, How recent, Type of Account) and recent inquiries about your credit.If you are planning on getting a mortgage loan make sure you are making all of your current payments on time and avoid any unnecessary inquiries into your credit. In other words, don’t go out shopping for a car or new furniture and have sales people all over town running credit checks on you. If you want to have the highest scores possible and therefore qualify for the best rates available it is best to be patient and wait until your loan is done before you go do things that will affect your scores.

    5. Not Having a Prioritized List of What Is Important

    Many new home buyers will often get swept up in the excitement of becoming homeowners then after it’s too late they find out that the home they just purchased does not suit their needs. Before even beginning the process clearly define your wants and needs. Put the list in writing and prioritize it in order of importance. Measure each property you look at to determine how well it matches your list.

    Here is a list of some items to take into consideration:

    Size of home: Number of Bedrooms, Baths, Etc.

    Style: Are stairs or a basement ok? Etc.

    Type: Single Family, Duplex

    Condition: Does is have to be near perfect or are you willing to do some repairs in order to get a better price?

    Location: Type of neighborhood, Proximity to work, schools, etc.

    Special Features: Garage, Wheelchair access, Air Conditioning, Etc.

    6. Not Checking on Title and Boundary Issues

    It’s no fun to get to closing and find out that there is a problem with the Title to the property. These problems could appear in the form of undisclosed owners, tax liens, mechanics liens, easements, leases or other encumbrances. One of the first things that should be done as soon as you come to an agreement on the purchase of a property is to order a preliminary title report from a title company. Your real estate will normally handle this. Make sure you receive a copy and review it.

    If there are any parts of the report that you don’t understand, ask your agent or an employee of the title company to explain. If there are issues that need to be taken care of make sure that they are completed before closing and that the Title Company is issuing you a clean policy of Title Insurance. This Title Insurance Policy will help protect you from claims that may come along after the fact.It’s even worse when you find out about a problem after closing such as a problem with your property boundaries. For instance, if your neighbor discovers that the shed at the back of your property is sitting partially on their property it’s your problem regardless of whether the shed was built there by you or a previous owner. Survey’s help you avoid these types of problems.

    The dependence on survey’s varies from area to area depending on how established the neighborhoods and boundary lines are and the type of legal descriptions that are used. Your agent can give you a good idea of the necessity of a survey or an update of a previous survey. However, if there is any question as to the boundary lines of a property your offer should be made subject to your approval of a survey by a licensed company.

    7. Not Getting a Thorough Inspection

    Another valuable tool for avoiding unexpected problems is a professional inspection done by a licensed home inspection company.

    Your offer should also be subject to your approval of just such an inspection. A professional inspector will objectively inspect the home inside and out and should be able to give you a report of any item that needs to be fixed with associated, approximate cost.

    No home (even a fairly new home) is perfect. You should not be alarmed when the inspector suggests minor repairs or maintenance issues. This is quite normal. Avoiding the large repairs or expenses (such as termites, radon, mold, lead paint or asbestos) is when the inspection will more than pay for itself.

    The final installment will reveal the last of the common mistakes.


    The 12 Most Common Mistakes New Home Buyers Make (part one)

    August 6, 2007

    …..and how to avoid them

    “It’s much easier to cross a mine field when you know where
    the mines are. By knowing the common mistakes that most
    people make when buying a home you can save yourself time,
    money and a great deal of frustration.”

    For most people buying a home is the largest investment they
    will ever make. Unfortunately many homebuyers go into the
    process without learning about the process. This often leads
    the purchase being more expensive and more difficult than it
    needs to be. By learning from other people’s experience you
    can avoid…

    • paying too much for the home you want, or

    • losing the opportunity to own your dream home or,

    • buying a home with lots of problems or,

    • (worse) buying the wrong home .

    A systematic approach to the home-buying process can help you steer clear of these common mistakes, allowing you to not only cut costs and save time, but also make the process a more pleasant experience.

    12 Home Buyer Mistakes

    This important report discusses the 12 most common and costly. Home buyer mistakes and what you can do to avoid them:

    1. Not Checking Out Each Area Thoroughly

    If you are planning on buying a house in an area that you have lived in for a long time this may not be an issue. But if you are new to the area it will be well worth your while to ask people you trust about the different areas you are interested in. When you narrow it down to two or three choices, walk the neighborhoods, talk with people you meet, visit community organizations, schools, places of worship, etc. and make sure this is area you will be comfortable in.

    2. Not Verifying Value’s

    What price should you offer when you make an offer on a home? Is the seller asking too much or is this a bargain you should jump on? You will never know for sure until you research the market and look at what comparable homes have recently sold for in that particular neighborhood. This is something your real estate agent can help with. By accessing the local multiple listing service an agent can provide a list of all the homes that have sold in a prescribed area. Ask your agent to provide a list of all the homes that have sold within the last three to six months that are the same type of home that you are interested in and close to the same size and age (or at least condition) along with the final selling price of the property (including any known seller concessions).

    If you will take the time to drive by these properties you will quickly get a feel for values in the area and be better equipped to make a reasonable offer for the property. If you don’t have a real estate agent we would be happy to refer you to one.

    Mortgage Marketing Secrets

    3. Not Getting Pre-Approved For a Loan First

    This is where most people get the cart before the horse. They get excited about buying a home and start looking around. Before you know it they have hooked up with a real estate agent and are considering different properties. Then they finally ask the question:

    Can we afford this? Unfortunately the answer is often no and they have to start all over again. And, of course, when they start looking at lower priced homes their enthusiasm is dampened because they hadtheir hearts set on the nicer homes. Getting pre-approval not only helps you know what you can afford but it puts you in a stronger negotiating position as well. When the seller and their agent know that your loan is done and just waiting for you to find a property they will be much more interested in your offer and will give your offer more weight against competing offers.

    Getting pre-approved is fast, easy and normally free. Most mortgage professionals can obtain written pre-approval for you at no cost and no obligation, and it can all be done quite easily over-the-phone. More than just a verbal approval from your lending institution, a written pre-approval is as good as money in the bank. It entails a completed credit application, and a certificate from the lender which guarantees you a mortgage up to a specific level when you find the home you’re looking for. Make sure you are dealing with a professional who specializes in residential mortgages. The mortgage industry is extremely complicated with literally hundreds of options and choices.

    Using an expert can make the difference between getting into the home of your choice or having to rent forever.