Depending on your financial situation you will finance your home in one of the following ways,

• Buy Cash
• Use a Government subsidy
• Use employer subsidy
• Finance with a mortgage loan/bond
• A combination of the above

Buying Your Home Cash

If you are financially independent and wealthy you can purchase your new home cash, unfortunately most of us are not in Bill Gates or Warren Buffet’s league, so please continue reading.

Using A Government Subsidy

The Government provides a grant to qualifying persons to assist them in financing a home. To qualify for a government subsidy you must meet the following requirements:

• Be a South African Citizen or enjoy permanent resident status
• Married or living with a partner, if you are single you need to prove that you have financial dependants
• Be over the age of 21 and competent to contract
• Monthly household income of less than R3 500 per month
• Be a first time property buyer

For more details on the Government’s housing subsidy please visit the Department of Housing Website - Click Here.

Employer Subsidy

Many companies still offer a housing subsidy to staff members, although not as prevalent these days many large organisations especially Government departments and parastatal provide this benefit. Speak to your Human Resources department to find out whether your employer offers a housing subsidy.

Mortgage Loans/Bonds

Most homes in South Africa are financed through mortgage loans/bonds provide by the major banks and other mortgage lending institutions in South Africa. A mortgage loan is a loan provide by a bank/mortgage lender and secured by fixed property. To apply for a mortgage loan you need to qualify in terms of the banks credit criteria and be able to afford the monthly repayments.

Purchasing a home is a big commitment and often a buyer might make use of a combination of these options , i.e.) cash and mortgage or mortgage and employer subsidy. If you are unable to afford or qualify for a mortgage loan at present you should read How to Qualify for A Mortgage Loan.

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• To create one set of rules for all credit activities
• To prevent reckless lending by credit providers
• To improve consumer rights for credit consumers.

These objectives are achieved by 3 Regulations used to protect consumers,

Regulation 1 - assessing the consumer’s ability to pay
Regulation 2 – Disclosure of all costs
Regulation 3 – Interest rate caps replacing the old Usury Act limits.

What Credit Agreements Are Covered By The NCA?

The NCA applies to overdrafts, credit cards, personal loans, vehicle loans and mortgage loans.

Duties Imposed On Credit Providers

• To achieve the objectives of the legislation the NCA imposes certain duties on credit providers,
• Conduct a proper assessment of each credit applicant’s ability to pay the loan , this duty requires that the credit applicant truthfully disclose the income and expenses
• Evaluate the applicant’s understanding of the risks , costs and obligations that are associated with the credit agreement
• If the application is declined , the credit provider must provide valid reasons
• Obtain the applicant’s permission to cross market other financial products to the applicant
• Report all new credit agreements to credit bureaus and record this information in the National Loans Register
• The credit provider is also required to report on the creditors conduct regarding payments and must ensure that reporting to any credit bureau is 100 accurate and factual.
• Provide the applicant with a pre- agreement/quote detailing all costs relating to the credit agreement. The pre-agreement is valid for 5 business days.

Consumer Rights

One of the most important changes made to the credit/lending industry is the rights that consumers enjoy since the introduction of the NCA ,

• the right to apply for credit and not to be discriminated against
• To receive communication and documentation in a language that the consumer reads and understands to the extent that it is reasonable , the documentation must be in plain language that the lay person can understand
• The right to query any information recorded at a credit bureau or the national credit register and to challenge the accuracy of it and the right to be notified when any adverse information is recorded at a credit bureau
• If the consumer feels that they are struggling under a mountain of debt they now have the right to approach a debt counselor who will investigate and make a recommendation , while a debt review is pending all legal proceedings are halted until a determination is reached
• The right to resolve disputes through a dispute resolution process starting with the creditor provider ,then the Banking Ombudsman and ultimately referring the matter to the National Credit Regulator.

Since the introduction of the NCA , the credit application and approval process should become more transparent enabling credit consumers to make more informed credit choices and enjoy greater access to information relating to the credit agreement including credit information recorded by various credit bureaus.

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Before the implementation of the National Credit Act (NCA) in June 2007 banks and other mortgage lenders typically would calculate a bond based on payments of not more that 30% of your gross monthly income. In the case of a joint purchase they would look at 30% of the combined gross incomes.

This methodology wasn’t overly concerned with your other debts as the banks were comfortable that they had a first claim on any income and the debt was secured by a mortgage over immovable property.

Since the introduction of the NCA , banks and other mortgage lenders need to evaluate the prospective borrower’s ability to repay the proposed bond. They need to take into account all of your expenses and all your other debts before determining how much disposable income you have to service a bond. The result of this is that since the NCA was introduced people typically are qualifying for much lower mortgage amounts resulting in fewer home loans being granted sine June 2007.

Here are a few tips to maximise the amount you qualify for:

• Prepare a budget and evaluate your monthly expenditure, eliminate all non-essential and luxury items
• Always try and pay your debts on time , if you have a problem making a particular payment speak to your creditors
• Make a list of all you debt and rank your debt by interest rate starting with the highest to the lowest. Pay off the highest cost debt first by making additional payments, once it is settled move on to the next highest and so on.
• Because of the stricter mortgage lending requirements it is important that you have a substantial deposit when applying for a bond. If you don’t have any savings available consider setting up a savings/investment plan after settling any debts.
• Find ways to increase your income , ask your boss for a raise , work overtime or consider getting a second job – the more you earn the more bond you will qualify for
• Find out whether your employer offers a housing subsidy to employees
• Before applying for a home loan check your credit score to make sure that there are no negative items recorded against your profile. You don’t want the bank/mortgage lender to be the one to tell you about it. If there are any adverse comments take the necessary steps to correct it.

Applying these simple principles will enable you to apply for a larger mortgage loan at a better interest rate as well. To see how much you currently qualify try our free mortgage affordability calculator.

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I have rounded up some of the best mortgage loan stories from the web and the blogosphere , especially those that be relevant to the South African mortgage market.

Nedbank Homeloans – Rumored To Be One Of The Best, But Are They …

In order to qualify for a Nedbank home loan, you must be a South African resident with a good credit record. Also, minimum monthly income requirements exist. Before you ever think about apply for a home loan, make sure you check your credit report. … The higher your credit score, the better home loan terms will be offered to you. You also want to make sure you have two or three months? worth of mortgage payments in the bank. These are called reserves. …

Everything About Loan | Solutions About Personal,Mortgage,and …

The significant growth that the RE/MAX Real Estate firm has experienced manifested in its development in Africa, Asia, Australia, the Caribbean, Central America, Europe, Mexico, New Zealand and South America. …

BANK REPOSSESSED PROPERTY AND MORTGAGE BOND | South African …

The answer is that once your have signed an offer to purchase, there is usually only a limited time available to secure a home loan, and the quickest and most effective way to do so is usually through a mortgage originator. …

How to secure a 100% Home Loan | SA HOME LOANS

How to secure a 100% Home Loan –>. Home Loan Tips: Which banks are offering are currently offering full 100% bonds? The four major mortgage providers in South Africa are: ABSA Home Loans; Standard Bank Home Loans; FNB Home Loans …

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Expectations are that this trend should continue through 09 and start slowing down towards the end of the year. The effects of rate cuts should start taking effect , rate moves typically have a lag effect and could take up to 18 months before they impact on the consumer confidence and the economy. Another factor to consider is that debt laden consumers are using rate decreases to pay down debt which has positive long term benefits for the South African economy.

According to the Absa House Index

Small Houses (80m²-140m²) declined by 4.7% with the average house valued at R 653 000 ,

Medium Houses (141m²-220m²) declined by 3.1% with the average house valued at R 917 600 ,

Large Houses (221m²-400m²) declined by 0.5% with the average house valued at R 1 381 700.

It is interesting to note that larger house showed the lowest decline indicating that larger houses might well be a better investment . Weaker house prices are good news for property investors shopping for bargains and buyers who don’t have to sell an existing property.

Homeowners should focus on reducing their debt levels and paying down their mortgage.If you don’t have to sell then it would be prudent to hold on until next year when the economy starts to improve and the country is in the midst of World Cup euphoria.

Post from: Loanfinder

Fortunately there are a number of finance options provided by banks & finance companies and choosing the right financing option is largely dependent on your cash-flow, tax status and whether you intend using the vehicle to generate income and/or receive a travel allowance.

Essentially these vehicle-financing options are:

• Installment Sale Agreement
• Lease Agreement
• Rental

These financing options are discussed in greater detail below:

Installment Sale Agreement

Previously more commonly known as a hire purchase agreement , it allllows you to purchase a vehicle and pay for it over a period of time up to 60 months, you own the vehicle after making the final payment.

The main features of an Installment Sale Agreement are:

Ownership – The bank or finance company owns the vehicle until you make the final payment.

Deposit – A deposit is not required in terms of the National Credit Act , but in terms of its own internal credit policies the finance company may require a deposit depending on your current financial status.

Vat – is payable at inception and if you are a registered VAT vendor and use the vehicle to generate income you will be able to claim an input credit.

Tax – If you use your vehicle for business purposes you will be able to deduct interest and wear and tear

Lease Agreement

Provides you with the use of the vehicle while you make the monthly payments, ownership does not automatically pass to you, however the agreement can allow for you to take ownership .

Ownership – The bank/finance company owns the vehicle , you can take ownership at the end of the period subject to certain terms and conditions.

Deposit – A deposit is not required in terms of the National Credit Act , but in terms of its own internal credit policies the finance company may require a deposit depending on your current financial status.

Vat – Vat is capitalised at inception and can be claimed as an input credit if you are a registerd VAT vendor.

Tax – Lease payments are tax deductible if you use the vehicle for business purposes.

Rental Agreement

Similar to a lease except for the fact that VAT is not capitalised upfront , but included in the monthly rentals.

Ownership – The bank/finance company owns the vehicle , you can take ownership at the end of the period subject to certain terms and conditions.

Deposit – A deposit is not required in terms of the National Credit Act , but in terms of its own internal credit policies the finance company may require a deposit depending on your current financial status.

Vat – Vat is included in the monthly rental payments and can be claimed as an input credit if you are a registered VAT vendor.

Tax – rental payments are tax deductible if you use the vehicle for business purposes.

Which Option Should You Choose?

That depends entirely on your personal circumstances and salary structure, but here are a few general rules of thumb:

Installment Sale Agreement - if you intend using the vehicle for private use and want to own your car then Installment Sales Agreement is the best option for you.

Lease Agreement – high mileage drivers and individuals who receive a car allowance and can deduct certain expenses against the car allowance would benefit from this option.

Rental Agreement – Individuals who are able to deduct the monthly rentals against their income and claim an input credit for the monthly Vat component will benefit from a rental agreement.

Deciding on the right vehicle financing option for you can be complex especially when you factor in the Income Tax and Vat deductions that you may qualify for – before purchasing a vehicle it is a good idea to consult a tax practitioner or financial planner.

Remember that know matter which vehicle financing option you decide on you should ensure that the vehicle is adequately insured , try and direct you to their own in-house insurance option. It will however pay you to shop around and compare insurance rates so that you can obtain the best car insurance.

Click Here for you FREE Car Insurance quote - you will probably end up saving on your monthly premium.

To calculate your monthly car payments use our free Vehicle Payments Calculator - You may use this for installment sale agreements , lease agreements and rental options .

Post from: Loanfinder

Reserve Bank Governor Tito Moboweni did however warn that future rate cuts could not be counted on as cost pressures within the South African economy were still high and the SARB still had its eye on inflation and its inflation targeting mandate.

It is unlikely that these rate cuts will have an immediate impact on consumer confidence and spending as most consumers will look to reducing mortgage loans and other debts like car loans and credit cards. Many are probably behind on their debt commitments so any interest savings will in any likelihood be used to catch up on overdue amounts.

Anyone who is paying off a mortgage or a car loan at least has reason to smile tonight. To calculate your new bond payment and see what you monthly savings will be you can use our mortgage payment calculator.

Post from: Loanfinder

According to Sim Tshabala Deputy CEO , they expect bad debts to continue increasing throughout 2009 with stability coming to the market during 2009. Standard Bank still expected earnings for 2009 to be solid with no nasty surprises for investors or depositors , unlike some of the bigger international banks.

Nevertheless South African banks have all been hurt by rising bad debts as well as lower consumer confidence , unemployment is a serious concern in certain sectors. Consumers are spending less and borrowing less all of which are bad for banks who generate fees when you swipe your credit and debit cards and make money through lending.

You can read the full story

Post from: Loanfinder

According to NAAMSA new car sales for March 2009 were down a whopping 30.3 compared to April 2008 ,a total of 36 332 units sold compared to 52 146 for the previous March. The decline for the first quarter of 2009 is 34.2% comapred to 2008 Q1 figures.

Factors contributing to the slowdown are the global recession as well as more stringent lending criteria since the introduction of the NCA in 2007. Global auto manufacturers have also been experiencing tough times with the future of US automakers General Motors and Chrysler appearing bleak. General Motors having to go through a major restructure while Chrysler recently went into bankruptcy.

It may not be quite so bad for the local auto industry , but times are tough and many auto workers are facing retrenchment. What does this mean for South African car buyers , if you can obtain financing or better yet don’t need financing , you are in a fantastic position to score some great deals. Dealers are keen for business and you should be able to negotiate a good deal.

Use LoanFinder’s vehicle payment calculator to help calculate your payments.

Post from: Loanfinder

According to the FNB report home prices have fallen 10% year on year for the period ending April 2009. The average house price will cost you about R675 000 after reaching a peak of R758 000 in February 2008

This is hardly news to consumers and property owners and even interest rate cuts of 350 basis points since December have not really helped the depressed housing market , although you need to factor in the fact that rate movements have a lag effect of approximately 12 months.

The biggest single factor driving property prices down is the current global recession coupled with certain local political risk factors.  Once President Zuma is inaugarated and his cabinet has been announced(especially the position of Finance Minister) political uncertainty should reduce significantly. Other factors are the over supply eveident in the property market - just drive around your suburb or town and take note of all the For Sale signs.

Most commentators agree that the current global recession should last until next year with only the most upbeat experts predicting positive news by late 2009.This means that we can expect to see the property market improving during the latter half of 2010 with the major concern being jobs and unemployment as well as shrinking disposable income.

What should property owners and prospective buyers do in the current situation:

• Don’t sell unless you absolutely need to , especially if you purchased your property during the last two years. If you bought prior to 2006 you will still experience reasonable capital appreciation on your property , obviously depending on when you bought.
• If you are in the market to buy and you don’t need to sell a property then this is an excellent oppurtunity and you should BUY! Don’t wait for the bottom of the cycle you may well miss the boat and kick yourself for years to come.
• If you are in dire financial straights and can’t afford your monthly mortgage payments , don’t become a panic seller. Talk to your bank about restructuring your current mortgage payments, your bank in not interested in foreclosing and selling your property in a depressed property market.

You can read the full FNB Report

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