26 Mar 2012
Buying a home is certainly not an everyday or even frequent event for most South Africans, and many aspirant homeowners are at a real loss when it comes to applying for and obtaining mortgage finance.
Rudi Botha, CEO of leading SA mortgage originator Betterbond, says even repeat buyers may struggle with this because the market has changed so much since many of them bought their current homes, and the ‘rules’ for obtaining a home loan are so different now.
Consequently, he says it’s a good idea to seek advice and help from a bond originator before starting to hunt for a home.
Importantly, a good originator is able to help the prospective borrower understand how much home finance he or she is likely to qualify for, by undertaking a proper affordability assessment, explains Botha.
This includes carefully checking bank statements, salary slips and tax returns as well as the borrower’s credit history, cash available and ability to really afford monthly home loan repayments without hardship.
On the basis of this assessment, he says potential buyers can gauge very accurately what property price range to target when they do go house hunting, so that they don’t waste time looking at homes they cannot afford. Also, they will be spared the embarrassment of making an offer only to have their home loan application refused on affordability grounds.
“In some cases, we are also able to help prospective borrowers improve their chances of obtaining finance by suggesting that they first save up a deposit, or perhaps take the time to repair a damaged credit record.”
Botha says other important advice available from mortgage originators concerns the size of any deposit that is likely to be required - which not only varies from bank to bank, but can also depend on the purchase price of the property – as well as the total cost of the potential purchase, including transfer costs and the interest on the home loan.
For example, he says on a R1 million purchase made with a 100% loan, the transfer costs including duty, bond registration and attorney fees would amount to some R45 000, while the interest payable on the loan over 20 years would be in the region of R1.2 million.
“If the potential buyer were to pay a 10% deposit, the transfer costs would only be reduced by about R1000, but the interest payable over 20 years would be R1.05m – a big saving.”
In addition, Botha says some banks might then be willing to grant the loan at a lower interest rate, which would mean even bigger savings.
Meanwhile, he says loan consultants working for originators know exactly what information and paperwork is required by each bank when an application is submitted, and can ensure that each application has the very best chance of succeeding.
Botha says while only about 50% of applications are initially approved by lenders, Betterbond is able to get a further 16% approved by giving potential borrowers the proper advice, and by individually motivating the applications and sometimes submitting them to more than one bank.
“We are thus able to show a 66% success rate, which is especially relevant for self-employed individuals, for whom it is particularly difficult to get a loan at the moment.”
Botha adds the service is free to the borrower, and unbiased as to any particular financial institution.
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