It is important to enter the property market with a good understanding of how a property purchase works, how much you can afford to borrow, all the costs that are involved etc.
Step 1 – Determine how much you can afford
· Know what you can afford.
· What you can afford while interest rates are relatively low is not your most important criteria.
· Most homes are re-possessed during times when interest rates are high and monthly installments become difficult to handle. Very few people can afford to pay more than 30% of their monthly income on bond repayments. Consider taking a loan for less than what you can afford at the moment.
· Try to be disciplined to set up a savings plan for unforeseen expenses by not over committing yourself on bond repayments. What will happen if your car needs repairs or maybe you will need money for your child’s school fees etc.
· Determine if you would still be able to afford a mortgage if interest rates go up with 5%.
Step 2 – Determine how much you can qualify for
Major banks will grant you a bond of up to 25 times your monthly combined salary. Your monthly repayments may not exceed 30% of your joint monthly income (before any deductions).
· In accordance with the National Credit Act banks must also determine each applicant’s affordability of the loan. This means that, after all monthly expenses have been paid, you would still need to afford this loan.
· Phone a GPF consultant at 086 110 6204 to help you establish exactly for how much you can qualify for
Step 3 – House Hunting
· Use the Internet, estate agents, trade shows etc.
· Consult magazines like Property Trader, PropLink as well as the housing section of local newspapers
· Find out as much as possible about the residential area you’re interested in:
· Is it a safe area (criminal activities etc.) ?
· Is it in close proximity of schools, shopping centre, hospitals etc?
· Does it have any recreational facilities (parks, golf courses)?
· Future potential development?
· Drive through the area, go to the local shopping centre. Jot down positives and negatives. This will give you a good idea of the general condition of the area.
Step 4 – Determine how much to pay for the property
· Many times a 5-10 percent cushion is built into the sales price of a home to allow negotiation of a sales offer.
· Make use of a Comparative Market Analysis (CMA) report. This will disclose information on recent selling prices in a residential area, specific street etc. to assist you in getting a better idea of the market value of properties in an area.
· Such a report can be obtained from a GPF consultant at 086 110 6204
Step 5 – Offer to purchase
· The buyer submits a signed offer to purchase to the seller, which the seller can accept or reject.
· On acceptance by the seller, your offer becomes a legally binding contract.
· The contract set out certain terms of the contract such as date of occupation, occupational rent, purchase price, conditions of sale, etc.
· During this stage you will experience pressure from some estate agents to have an “All In One” service, which includes the agent arranging your bond (mortgage) financing.
· You, and you alone can decide if you want to arrange your own finance or through a bond broker (originator) of your choice, or not.
· Getting a Loan From Your Estate Agent or the Mortgage Company in Your Real Estate Agent’s Office May Not Save You Any Money.
· Most bond originators will pay your registration fees for example, whereas your agent might not be prepared to give up some of his commission.
· It has been our experience that some Estate Agents are not educated enough and do not have the experience to originate mortgage loans. They spread themselves too thin and it ultimately hurts the buyer. Estate Agents sell property and Mortgage/Bond Companies originate mortgage loans/bonds.
Step 6 – Choosing a Home Loan
· Compare different banks to decide on your lender of choice.
· Choose between the following interest rate options:
· fixed interest rate (where your rate remains unchanged over a certain period)
· variable rate (interest rates goes up and down according to the banks prime lending rate)
· capped interest rate (your interest rate will not increase above a specified rate over a certain period)
· combination of fixed and variable (where part of the interest rate is fixed and part is variable
Step 7 – Applying For a Home Loan
· Home loans can be obtained quickly and effortlessly with the right people on your side.
· Contact a GPF Mortgage consultant to simultaneously apply at all the major banks and help you save money.
· You can virtually obtain a home loan from the comfort of your home.
· Your goal is to save as much as possible on interest, because saving on interest has the same net result as earning interest.
· You can also go directly to a financial institution of your choice.
For more information on financing your home why not contact one of our mortgage advisors to learn more about what you’ve read. Talking to an expert can make the difference between getting into the home of your choice or having to rent forever.