Work out what bond you as a Purchaser should qualify for
The loan amount you can qualify for is limited by your monthly income and by your total disposable income. Only 30% of your income can be used to pay towards a home loan.
The National Credit Act has taken this one step further and banks are now required to ensure you have enough disposable income to support a bond repayment. Thus the way in which purchasers are assessed has changed.
To work out how much you qualify for:
Calculate 30% of your monthly income:
ie: R30 000.00 per month will be R10 000.00 – the bond amount would be limited to a maximum of R10 000.00. You will then have to list ALL your current expenses, including fuel, petrol, school fees, etc and prove that you can in fact actually afford to repay R10 000.00 per month back.
If after ALL expenses are deducted, you are only left with R6 000.00 then a bond with a repayment of R6 000.00 is all you will qualify for even though it is less than their 30%. Also remember that the bank looks at your credit record – do you pay your accounts on time? Are you black listed etc.
The good news is that if you are currently paying rent – this amount is added to your disposable income.
This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za
Properties under R1 Million, “To target Investors”
With the interest rate at the lowest in years, investors are now targeting buy-to-let properties. Many landlords are now looking at double-digit rental increases this year.
A strong recovery in investment buying is predicted for this year. Investors will be looking to buy properties priced below R1m, due to stronger returns being expected than cash in the bank. Property still remains the best value for money.
“FNB property strategist, John Loos, backs up these claims referring to the latest Stats SA figures, which show that residential rentals have steadily increased with an average growth of 5.6% recorded in November year-on-year. Sectional title flats have shown the largest increase, jumping by 8.6% while free standing houses recorded the lowest growth at 3, 56%.”
According to the TPN (Tenant Profile Networking) Credit Bureau the percentage of residential tenants paying their rent on time has risen to 81% in the 3rd quarter of last year. The number of defaulting tenants has decreased to 10%.
This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za
The Interest Rate Lingo
Current Prime Interest Rate = 9.0%
What is a Fixed Rate vs Variable Rate:
The interest rate on a fixed rate home loan does not change.
The advantage of this is that you are protected from rate increases and your monthly payments are consistent. The disadvantage is that you will not benefit when the prime rate is dropping.
The fixed rate will usually be slightly higher than the prime rate at the time of your application.
The variable rate means that your repayment amount will increase or decrease with the prime rate.
What is a prime rate?
The rate at which the bank is currently lending.
Repo Rate vs Prime:
The Repo rate (repurchase rate) is the rate at which the Reserve Bank lends rands to our local banks. This rate is usually 3.5% lower than the current prime rate.
Jibar Rate vs Prime:
The Jibar rate (jhb interbank agreed rate), is used by SA HOME LOANS, while the Prime rate is used by the Major Banks (STD, ABSA, FNB and Nedbank).
This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za
Positive Feeling for Property 2011
The residential property market has several factors in its favour going into 2011:
- exceptionally low interest rates
- slower-than-expected consumer price inflation
- decreasing levels of household debt
Where you aware that the interest rate is the lowest it has been in 36 years?
With decreasing household debt couples can now consider purchasing a home of their own. Banks will be more favourable to granting a higher percentage bond. Low interest rates are already helping the property market by putting extra money into household piggybanks and boosting the demand for credit such as home loans.
Economists are predicting another rate cut early in the year, which can only be good news to consumers.
Standard Bank has estimated that inflation will average 4.6% y/y in 2011, so even if house prices only grow at 7% – which we think is what we can reasonably expect – these will still beat inflation in most cases.
Experts predict there will be a noticeable growth in the “small house” segment sales. All in All there is an atmosphere of positivity for the property market. Although property won’t boom, there will definitely be growth. Purchase Price will still remain a strong factor. The general feeling is that buyers. Similarly, while access to shops, schools and major transport routes is still important, these are also secondary considerations to price and running costs in almost every case.
There is a general feeling of positivity and growth for the property market for 2011, although there consensus that we cannot at this stage expect a property boom.
This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za
Policy Adjustments – Do It Now
“Thousands of homeowners in South Africa are returning to the daily grind of earning a living so that they can pay their monthly bills and one of the financial chores that must be tackled early in the New Year is a revision of the short-term insurance cover that applies to the property and its contents.”
It is a Great Time to Buy, but don’t Overspend
Homebuyers should never jump into the market with their eyes shut, even at times like these, when the combination of low interest rates and still-low property prices is creating some wonderful purchase opportunities.
Berry Everitt, CEO of the Chas Everitt International property group, says potential buyers – and especially those entering the market for the first time – should never lose sight of their own personal and financial circumstances, or of the fact that interest rates can go up just as easily and quickly as they come down.
“The low interest rates at the moment obviously do make it much easier to qualify for a home loan, to afford the monthly bond repayments and municipal charges, and to have money left over to keep the home in good condition.
“And as I’ve said elsewhere recently, prices in many areas are still below their pre-recession levels, which at the moment means that the sooner you buy, the better deal you are likely to get for your money.”
But it is extremely important, he says, for homebuyers not to purchase more home than they actually need just because it is “going cheap”, and vital that they leave themselves lots of leeway when working out what monthly bond instalment they can afford.
“Indeed, I think that buyers should always squeeze the price and not their budgets. What I mean by that is that rather than first finding a home to buy and then stretching the household budget to the limit to get the loan and afford the repayments every month, potential buyers should first take a hard look at what instalment they would feel comfortable paying, subtract some of that amount to allow for contingencies like the interest rate going up, and only then go shopping for the best house available in their price range.”
Everitt says good rule of thumb is that a new home should not cost more than 2,5 to three times the annual income of the family.
“So if your combined annual salary is R300 000, you should be looking at homes priced at R900 000 at most in order to keep up comfortably with the bond repayments once you have paid a deposit of at least 10%.”
Potential buyers, he says, should also bear in mind that the banks do not look at home loan debt in isolation. “Since the introduction of the National Credit Act, they have also been obliged to look at your overall financial situation – including debts such as car and credit card repayments as well as your regular monthly expenses such as school fees, insurance, food and transport costs and water and electricity accounts – before granting a home loan.
“And before you rush out to buy a home, I suggest this is what you should do, too, to ensure that all your debt commitments together will be manageable, even if interest rates rise. For peace of mind in this case, I would suggest that your total monthly debt repayments, including your bond instalment, should not exceed 40 percent of your income – which means they should add up to R10 000/ month or less if your combined monthly income is R25 000.”
This article has been reprinted with the kind permission of Chas Everitt International.
Barry Davies
011 801 2500, or visit
www.chaseveritt.com
Page Link: http://www.chaseveritt.com/html/press.html
It’s safer to sell before you buy a new home
Many homeowners are looking at the upgrading opportunities presented by the current market and making offers to purchase bigger and better properties before they have even listed their existing homes for sale.
And there are of course certain advantages to buying a new home before you sell the old one, says Berry Everitt, CEO of the Chas Everitt International property group. These include the fact that you know where you’ll be living next, when you can take occupancy and how much you’ll be paying.
“Buying first also usually means you won’t have to move twice. Many repeat home buyers have had to move to an interim rental property because they couldn’t find a replacement home by the time they had to turn their existing home over to the new buyers.”
However, he says, this really may not be the wisest approach. “For a start, there’s a good chance that it will take longer to sell your existing home than you anticipated it would, and that you could end up being liable for two home loan instalments a month.
“Such double payments can add up remarkably quickly, and then you would probably feel pressurised to lower the price of your old home just to achieve a sale.”
Writing in the Property Signposts newsletter, Everitt says it is best to do some homework before making any decision. “Find out the current market value of your home from reputable estate agents in your area and quiz them about market conditions. Is it a buyer’s or a seller’s market in your suburb? In a hot seller’s market, the chances of a quick sale are much higher than in a soft buyer’s market.
“You should also establish whether there any problems with your home that could make it difficult to sell. Is it located across the street from a noisy school? Is it next to a busy freeway? Does it lack a garage or a second bathroom? Is the floor plan awkward?”
Armed with this information, he says, you will be better able to assess the risk of buying first. If it’s likely that your home will sell quickly, it may be worth the risk of buying before selling. But if the marketability of your home is questionable, you should really consider taking the more conservative route of selling before buying.
This article has been reprinted with the kind permission of Chas Everitt International.
Berry Everitt
011 801 2500
www.chaseveritt.com
Most SA houses worth less than R500k
Johannesburg – More than half of South Africa’s six million residential properties registered in the Deeds Office are worth less than R500 000.
Currently, 3.5 million or 58% of these properties fall in the so-called affordable category – properties under R500 000 – 47% of which are in former townships. This emerged from new data from the Affordable Land and Housing Data Centre (al+hdc), which was announced on Wednesday.
This data centre is an initiative by the FinMark Trust, Urban LandMark, Lightstone and Eighty20. It is aimed at a comprehensive analysis of the market for affordable housing.
Although this market provides the overwhelming majority of accommodation in the country, it’s the market about which the least amount of information is available. The al+hdc is a database of properties in 2 400 residential areas, where the average property is worth under R500 000.
At current mortgage rates this housing would be affordable for households earning less than R16 000 a month – 88% of the country’s population.
This type of accommodation includes existing houses in former coloured, black and Indian townships, housing subsidised by the state, and new housing being developed by the private sector.
The affordable housing market is the market that is growing the fastest in terms of volume and value. More affordable homes worth less than R500 000 are being built each year than the more expensive houses.
Since 2004 an average of 70 000 new affordable units, including state-subsidised houses, have been registered at the Deeds Office per year, compared with 65 000 in the category of houses costing more than R500 000.
Although fewer new houses in the above-R500 000 market have been built since 2007, the figures have remained constant in the affordable housing market.
As far as housing finance is concerned, banks are very active in the affordable market – and the four big banks have taken the lead.
Absa has the biggest market share in terms of the number of mortgages granted to buyers in the affordable market, followed by Standard Bank, Nedbank and First National Bank (FNB).
But Standard Bank has the biggest market share based on the value of the properties, followed by Absa, Nedbank and FNB.
In all, 45% of properties worth between R250 000 and R500 000 in the affordable areas are financed by mortgages, compared with 63% of properties in the same price class in residential areas where the average price is above R500 000.
This article has been reprinted with the kind permission of Betterbond
Tel: 011 516 5500
Fax: 086 677 1162
Website: www.betterbond.co.za
Potential Restrictions to the use of your Property Purchased
Title Deed Restrictions
A property cannot be sold in contravention of a title deed restriction. For example, a property developer registers restrictive conditions against the title deeds of erven within a development, restricting the use of each of the erven. For example, there could be limitations on design, house size and roof covers. This type of restriction is very common for golf estates and gated communities.
Guide Plans
A guide plan is a broad outline for determining land use patterns for the future development of a region er for industrial development, commercial development, residential establishment, farmland, recreational areas, etc
Urban Structure/Development Plans
The larger local authorities should each have a structure, development or policy plan specifying the land use patterns for an entire town or city, or parts thereof. It should set out where shops, offices and residential development can take place.
Town Planning Schemes
Every local authority has a town planning scheme, which is devised for the purpose of providing for the general welfare and attractiveness of the environment. The scheme should consist of both a scheme map and scheme clauses, which sets out limitations and controls for the usage of property in an area:
The above impacts the way the land may or may not be utilized. If you are purchasing your property with the intention of starting a business, a day care centre etc. You will need to find out whether or not you will be permitted to do so before concluding an offer to purchase to avoid being disappointed.
Removal of Restrictions
It is possible to have a title deed description removed in terms of the Removal of Restrictions Act 84 of 1967. Applications for the removal of title deed restrictions are normally dealt with on behalf of the property owner by an attorney or town planner.
Rezoning can be more involved and the success of an application depends on the following:
- The town planning scheme
- The structure/development plan
- The need for re-zoning
- The desirability of the rezoning
- The environmental impact of the rezoning
- The precedent set by the rezoning
- The opportunities/restrictions relating to the property
- Acceptability of proposal to adjacent residents and civic associations
A rezoning application generally takes around 6 to 12 months to be processed and involves the following steps:
- Preparation of motivation or application for rezoning by applicant
- Advertising of the application, calling for comments from the public
- Replying to comments and objections
- Consideration of application by the local town planning department
- Referral of the application if required to other town council departments
- Referral of the application to the council committee
- Referral to provincial authority on appeal
In conclusion, the variables in land use control are vast. If any questions or queries on land use are required, it is prudent to refer these to a professional; a town planner, the local municipality or an attorney.
This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za
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