What is the difference between a Open and Exclusive Mandate?

October 31, 2007

When you decide to sell your property you must be aware of the type of mandate you are signing. Never sign a mandate which does not have a clause committing the estate agent to certain responsibilities.

Open Mandate

  • This allows more that one estate agency to market and sell your property. The agency ultimately selling your property is entitled on the commission.
  • Should you sell the property yourself, then the agency would not receive any commission
  • Since more estate agents are involved in the marketing of your house, there will be more opportunities to sell your house.
  • This represents a greater probability that you could get your asking price.
  • However, the estate agent will be less motivated to spend the maximum time, effort or money to advertise a property which might be sold by another agency.

Exclusive Mandate

  • This is the kind of mandate your estate agent would love. Should you sign an exclusive mandate with a specific agency, they are entitled to commission irrespective of who eventually sold the property.
  • Even if you sell the property yourself the agency will still be entitled to their commission.
  • Estate agents often adds a clause which states that if during the mandate period a buyer was introduced to your property, but only decided to buy after the mandate expired, the agency is still entitled to receive commission.
  • For obvious reasons the estate agent will be much more motivated in his or her marketing efforts than would be the case with an open mandate.

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

How To Escape from the Debt Rat Race

October 27, 2007

It is called “financial prison” because even though SA has people with good incomes, who are buying their own homes, they wind up in “financial prison” instead of “financial freedom” – mostly because of what bankers and credit card companies never tell them – and hope you never stop and think about. Just for example, the true interest rate on most home mortgages is about 200% – no, that’s not a misprint; yes 200%, because if you have a 30-year bond, you’ll pay for the home about three times…on a R750,000 bond, you’ll end up paying about R1,800,000 in interest!

That’s why ANYTHING you can do to cut the interest rate and/or pay it off faster MUST be taken advantage of.

Or for example, the kind of credit card debt most people take for granted can eat away your entire financial future like a horrible cancer. If you buy R8,000 worth of furniture with a typical credit card and make the minimum monthly payment, you’ll wind up paying about R40,000 for the furniture, 5 times what it’s worth. Do you think you can get ahead financially paying 5X’s what things are worth?

That’s why ANYTHING you can do to wipe out credit card debt MUST be considered.

If you have credit card debt you are not paying off in full every month, think about this: not only are you paying so much interest, you’re actually paying about five times what you buy is worth.

Imagine: Never shuffling through “the account pile” again, deciding who gets paid today and who doesn’t, not writing out a dozen cheques each month: financial simplification! And imagine having hundreds of free, extra money each month to invest, to get wealthy, so you can stop working if you like, retire early if you like, and maybe start a business. Did you profit from the recent property market boom? Do you have money making you money in mutual funds? Are you investing 15% of your income? If not, why not? — (because you’re spending too much of your income just paying bills!!!) Let’s change this for the better. Now

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

Avoid the Debt Consolidation Pitfalls

October 17, 2007

Beware Of Plastic!

  • Store cards and credit cards may be convenient, but they are also an easy way getting caught up in the debt trap. The reality is that in most cases people get so dependant on this kind of credit that it ends up being a long term liability.
  • The best investment you can make is to repay high interest debt. By paying off debt, you get one of the best returns available, tax-free. The tax-free return you receive from paying off debt is likely to be greater than any returns (which are likely to be taxed) you receive from an investment.
  • Always pay the full amount owing on your credit card. If you do not, you will be charged a punishing rate of interest from the date of purchase. The so-called budget account on your credit card is a misnomer, as you pay a high rate of interest.
  • Use a credit card to get 55 days’ interest-free credit by buying at the start of the buy-and-pay cycle and repaying the debt in full by the due date. This option does not apply to cash withdrawals and petrol purchases, on which you pay punitive interest rates from the date of the transaction.

Taking Your Credit For Granted

  • In the last few years the way lending decisions are made has become much more automated. The way 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 do things that will affect your score.

Borrow Wisely

  • Expensive debt is a quick way to lose money.
  • Most mortgage bonds enable you to repay more than your set repayments and to borrow against what you have paid.
  • This is useful not only to borrow money for other things at short notice, but also to use as a savings account.
  • The effective interest you receive is much greater and there are no additional costs. Say, for instance, you need to put away money to pay school fees or provisional tax. “Save” the money in your mortgage bond until you need it, rather than in a low-interest bank savings account.
  • Link your cheque and bond account. Pay your salary into your cheque account and since interest in calculated daily, this will reduce your loan amount and hence the interest you will pay.
  • Deposit your bonus into your bond and you will be surprised at the amounts you will be saving. If you pay for example a lump sum of R40 000 at the end of the first year on a bond of R500 000 @ 12% you can reduce your bond repayments with almost 7 years!

Manage Your Mortgage

  • Ensure that your pay your bond on a regular basis. Do not miss any payments since this will increase your interest liability. Arrears are costly and should be avoided at all times.
  • If you decide to cancel your bond study your loan contract and see if contains any penalty fees. If it does give at least 3 month’s notice. Some institutions can charge you a penalty fee that is equal to three months interest.
  • Think carefully before you decide to make use of interest only home loans. Although this will be affordable in the short term, contemplate the effect this will have on you and your family over the long term.
  • Interest rates been on the rise steadily, which will result in your interest payments being more that before. You could end up in a worse financial position than before.
  • Additionally you will remain in debt for much longer by delaying the repayment of the capital debt.
  • Remember there is nothing like a free holiday. Some institutions are offering payment holidays when you register a new mortgage bond with them. You can delay the payment of your first installment up to a certain number of days. In the mean time you are accumulating extra days of interest
  • Always make use of the services of a bond broker to help you avoid any potential pitfalls.

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

    Budgeting – It Has to be Done Otherwise You’re Sunk!

    October 17, 2007

    By Zulika van Heerden

    When you go to the bank at the end of the month and find you have spent more than you made you’re in trouble. Now, under financial stress, with no back-up and bills pouring in, you have to make huge attempts to cope with the situation. Fear and the sense that you are being overwhelmed by lack of money creates a myriad of other pressures in your life.

    At first glance running a home budget looks easy. However there are innumerable expenses that have to be allocated before you can feel confident that you have created an accurate all-encompassing control. The larger the household the more involved the budget becomes. When planning a budget, expenses that occur occasionally or annually are sometimes forgotten and not included in the budget. Breakdowns, motor vehicle repairs and services can easily be overlooked. It is these items that turn up, usually at the most inappropriate time and as ‘I-never-thought-of-that’ they become a money flap.

    Keeping a tight control on your funds is the surest way of accomplishing financial freedom. At every turn you are enticed to spend more; obtain more credit; buy now pay later. So what’s the solution. Self-control obviously, that always helps, and using an online budgeting program so that you can no longer fool yourself about how you spent the money because you thought you had it. Unfortunately if you don’t discipline yourself, life has a horrible way of doing it for you.

    Putting an organized system into place ensures that you have control over your money and that you are actively administering your cash flow. It is not the amount of money you earn, it is the how and what you do with it that creates a surplus or negative at the end of the week. This is where your own intelligence comes into play.

    Earning what you do right now, if it is well organized, allows you to see in an instant whether or not you can afford to spend money on an unbudgeted item. The guess work, the ‘I’m sure it’ll be OK’, all of that is eliminated. You end up dealing with known facts and exact amounts. Money is hard to deal with because there are too many decisions being made with too many unknowns. When asked for a snap decision for a purchase, are you able to go to your budget right now and after consulting with it know without an ounce of doubt if you have the finance available?

    If you were able to do that, half the struggle with money would be won – you’d know – yes or no. With a sound budget in place, keeping your affairs in order becomes less stressful. Knowing what is going on with your finances from week to week keeps you in control. By involving your family in the whole process you can help them understand the true value of managing money and thereby predicting.

    By using an online budgeting program you will quickly see where you are. Budget forecasting keeps you off the rocks and heads you into smoother waters. You can calculate what each financial decision will bring with it.

    Waiting until month end, when the accounts start piling up, then trying to cope just creates panic. There is no room or time to manoeuvre. However by having a fully-inclusive budget in place, and being able to access it from anywhere, you can see at a glance if you have money available. It then becomes easy to say ‘No thank you. Not this month’. No matter the level of credit available to you. (Most people are allowed credit way above their ability to pay it. Just because the credit card companies say you can have the credit doesn’t mean you can afford it.) With your budget in place you are confident that month-end bills will be paid and you, not your debt is running the show.

    A budgeting system is your key to gaining the financial freedom you’ve always wanted. The program puts the power in your hands so that you can start budgeting and planning right now. However, you have to use it and you have to be strict with yourself. A budgeting system is of no use to you if you ignore what it is telling you.

    With a sound budget system in place, you will soon be on your way to a calm orderly conquering of debt.

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

    What is the purpose of the National Credit Act?

    October 2, 2007

    What is the purpose of the National Credit Act?

    The National Credit Act, which came into effect on 1 June 2007 which aims to ensure the regulation of credit granting practices. The Act will promote a credit market that is fair, accessible and responsible, transparent, and setting a framework for various types of credit transactions.

    The Act is enforced by the National Credit Regulator which purposes to educate and protect consumers from reckless lending, high interest rates and unfair lending practices. A database of credit transactions is being implemented by the National Credit Regulator, including information about credit agreements, which are provided by lenders and credit bureaus.

    This database can be checked by credit providers to determine whether a consumer can afford additional debt. The Act imposes greater demands on lenders to ensure that consumers understand the nature of their credit agreements.

    Which agreements are regulated by the Act?

    • Micro-loans and pawn transactions
    • Home loans (Mortgages)
    • Personal loans
    • Overdrafts
    • Vehicle finance
    • Credit Cards
    • Furniture Credit
    • Retail Credit
    • Any other type of credit or loan

    What is the purpose of the National Credit Act?

    The National Credit Act replaces the Credit Agreements Act (which regulated installment sale agreements), the Usury Act (which regulates money lending) and the Exemption Notice to the Usury Act, which exempted micro lenders from the interest rate cap imposed on banks.

    Consumer rights

    These rights include:

    • To apply for credit
    • You will be protected against discrimination in the granting of credit
    • You will be informed why credit has not been granted, should you ask
    • You will receive a free copy of your credit agreement
    • You will receive a credit agreement in plain and simple language
    • You have the right that your personal and financial information are being treated confidential.
    • You should understand all fees, costs, interest rates, the total installment and any other details
    • You can say no to increases on your credit limit and
    • You decide whether or not you want to be informed about products or services via telephone, SMS, mail or e-mail campaigns.
    • You can apply for debt counseling should you be overwhelmed by debt.

    What does this mean?

    Reckless granting of credit is prohibited under the Act. Reckless credit is when a credit provider gives you a loan without determining whether you can repay the loan. The Act reminds you that you have both the right and responsibility to understand and question how your credit agreements are structured; what payments you will be required to make, and what the terms and conditions involve.

    You must be given a written quotation which discloses all costs before you sign a credit agreement. Credit providers often try to reduce your common law rights through complex clauses, but this cannot happen anymore due to standard credit agreements.

    Furthermore, a court can set aside all or a part of a debtor’s obligations if the granting of credit is deemed to have been reckless. The Credit Act also makes provision to settle credit agreements without penalties or notice.

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

    Refinancing: The Cash Out Option

    October 1, 2007

    In many cases, a refinance loan is used to acquire money for things other than paying off the existing mortgage. In essence, the home owner borrows more money than he already owes on the home. This is referred to as the cash out option since the home owner opts to take additional cash out of the equity of his home when refinancing.

    Although the original mortgage might get paid off with the proceeds from the refinance loan, other financial matters might be taken care of as well. In particular, refinancing an existing home loan for more money than the homeowner owes to the lender is an excellent way to obtain sufficient funds to consolidate debts.

    Consolidating debts into one loan typically lowers monthly expenditure while saving exorbitant interest fees. Instead of retaining a lot of individual accounts each month, the homeowner is able to consolidate all of his accounts into one. Not only does this save him money, but also, it saves him the time and frustration of dealing with lots of small accounts that lead to large fees in interest charges or late fees.

    Refinancing an existing home loan for more money than the homeowner owes to the lender is also used for other financial matters. Some of these can include but are not limited to home renovating, education expenses, wedding expenses, vacations, and more.

    Since the equity of the home will come into play with the cash out loan, it is important to understand the meaning of the words, home equity. Home equity refers to the current monetary value of the home. It is calculated by taking the current market value of the property and subtracting the current debt owed on the property.

    Any additional structures on the property are included in the market value appraisal (valuation). Likewise, all existing home loans are included in the determination of the debt owed on the property. For example, the current market value of the home is R900,000.00. You still owe the bank R200,000.00 You subtract the debt of R200,000.00 from the market value of R900,000.00. The home equity is then determined to be R700,000.00

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

    Home Buyer Products: Uncovered (Part One)

    October 1, 2007

    Part one in a two part series on Bond types available.

    1. Ordinary Home Loan (Bond)

    In SA it remains the most popular way of financing a property. The bond is paid off over the lifetime of the loan that can vary between 5 to 30 years. The monthly repayments include capital and interest repayments.

    Interest rates are an important factor to consider, since this will determine how much you pay for your home loan at the end of the day. Although there is a market rate, the interest rate varies from lender to lender.

    Increase your monthly payments to reduce the term and interest of your loan. Since the majority of each indivudual’s monthly installments will go towards interest repayments (especially in the beginning) you will greatly reduce your capital debt by such an increase.

    Interest is calculated on a daily basis and if your bond payment is due on the 30th of every month, make your bond payments five days earlier each month and save in the long term or split your payment amount between the 15th and the 30th and you save even more. If you make your bond payment on the 15th instead of at the 30th, you are saving 15 days worth of interest.

    For additional savings maintain your original payments even if the interest rate drops. This way you can pay off your bond in record time and save on interest, without any affect on your current budget.

    2. Access Bond

    The access choice has more advantages than conventional bonds. With this bond a person has the opportunity to use the paid-off amounts at any stage and without prior permission from his financial institution.

    This kind of bond is convenient if a person needs money at a later stage for home improvements. They can pay for improvements when it is done and without having to pay interest on the full amount.

    Excess funds may also be used to purchase short term assets like furniture for example. However it is poor financial management, to use your bond facility to pay for short term debt. If you choose such an option you must be disciplined enough to keep the repayment short as well.

    You can also use this kind of bond to pay off your high interest debt like credit cards, bank overdrafts, retail accounts, personal & micro loans etc. The amount you save on interest could be invested into your bond for additional savings. Once again you must settle such debt as soon as possible if you want to derive any savings.

    3. Covering Bond (Mortgage)A covering bond may be registered over immovable property to serve as security for a bank overdraft. Such a bond may be a first, second, third bond, etc.

    However it is not easy to obtain a covering bond from another financial institution once they have registered a first bond over a property. The reason for this is that the first financial institution will have first claim to the property in the event of liquidation.

    4. The One Account

    This kind of bond caters for all of your transactional banking needs. The single facility, secured by your home, fulfils all the functions of a cheque account, overdraft, personal and home loan.

    Basically it can be viewed as single credit facility or one large overdraft. It is designed to save you money because of lower rates, but you run the risk of losing your home if you cannot keep up with the payments.

    These accounts are expensive to set up due to the higher monthly admin fees and structuring fees.

    5. Interest Only Bond (Mortgage)

    The interest only facility allows you to repay only interest on a loan for a predetermined period or over the entire loan term. The capital is repaid at the end of the term.

    This allows you to repay interest only on a loan, either for a specified period or the entire loan term, and repay the capital by a cash injection or bullet payment at the end of the facility.

    This product is common in the overseas markets, but in SA it is relatively new.

    Although this might seem like an attractive proposition for some, because of lower monthly repayments, there are a few factors to consider.

    You will remain in debt for much longer, and pay much more in interest over the term of your loan, because the capital amount never decreases.

    Your financial position will worsen if interest rates go up compared to an ordinary home loan. The reason for this is that the interest of a conventional home loan decreases over time, but with an interest only loan your interest repayments will increase with a increase in interest rates.

    6. First-Time Home Loan

    This uniquely structured facility assists first-time home buyers to buy property without any upfront cash to pay for transfer and registration costs. It is appropriately also known as a 108% home loan.

    The bank will borrow you the money to pay for the full purchase price op the property (100% of the loan amount) plus they will include transfer and registration costs (additional 8%)

    The interest on such a loan is higher than the norm, due to the higher risks associated with such a loans. However as soon as you have built up some equity you could then re-negotiate a better rate.

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