FNB - and buy to let news

So is buy-to-let the new way to go.

The on-going saga and lack of capital growth in the residential property market has made investment
in residential real estate so unattractive compared to the earlier part of the last years when house price growth were at much higher levels. Yields are also driven down by financially strained tenants and rising costs of maintenance, petrol, home goods etc, further stacking up an argument against investing in residential property unless you have a big daddy.

However, as more young South Africans require housing, there is a constant growth of demand for rental houses and flats. Ownership is not always possible or feasible and for some there will always be strong arguments in favor of renting instead of buying. This is aggravated further by challenges that banks face in granting credit - you better stay squeeky clean. These poor folk often have no other choice but to enter the rental market.

Should the SA reserve bank’s repo rate, and in turn the bank lending rates rise, the argument quickly tips in favor of renting rather than buying and is expected to further increase the demand for rental properties in the short term.

This rising demand for rental properties and slow growth in supply is expected to ultimately drive up yields to a point where buy-to-let property becomes a much more attractive investment. Once this excess demand pushes prices upward, investors will start earning higher returns. High returns will in turn attract more investors to participate in the rental market, buying up a larger portion of stock.

Risks of financing buy-to-let properties are not expected to change, but banks will continue to support this market with responsible lending to enable a much larger buy-to-let market tosupport the growing demand for housing in South Africa.

Buy-to-let ask your mortgage originator today.

NEDBANK - A GREAT Balancing Act - to get a Home Loan!!!!

Well I am impressed when I hear a  credit manager tell me what is needed to get a home loan - open policy - nice to see Nedbank .

Three pillars of strength needed folks - thats all so YOU WANT A HOME LOAN then -

RISK - You need to make the bank feel that all the risk is not only on their shoulders but also on yours.  So what do you need for this - A deposit reduces the banks risk and adds yours into the pot, so start saving.  Be a smart finance manager, so manage your accounts and VERY VERY important PAY YOUR ACCOUNTS ON TIME or in ADVANCE.  Never pay late.  Nedbank, like most banks have an internally risk rating of you as a client, so contact your Mortgage Broker and get your risk rating in advance, THEN apply for a mortgage only.

SECURITY - Well no one wants to be left hanging and neither do the banks and this is not particular for Nedbank only.  So make sure what you buy is acceptable for the banks to finance.  If a sectional title flat or apartment get the body corporate financials and make sure the body corporate is in the black (positive cash flow), not to many arrears and outstanding levies, and up to date paid insurance.  Then the bank will feel comfortable as well.  If you have just started a job, make sure you supply your job contract together with a payslip.  Its all about feeling secure. 

Ask your broker.

AFFORDABILITY  - If you want to be declined then dont justify what you can afford.  Remember 30% of your income is the MAXIMUM that the banks will allow you to spend on your home loan.  THATS IT!

DO NOT INFLATE YOUR SALARY AND INCOME! OR DEFLATE YOUR EXPENSES! If it is unrealistic the banks will automatically add an additional 25% to your expenses and once declined on affordability it is very difficult to convince credit managers otherwise.  IT IS TO PROTECT YOU afterall!!!!!!  Ask your mortgage advisor to assist you before you have a bash yourself.

Lovely, easy and A GREAT BALANCING ACT!

Buy-to-let, it's not dead, it's just tough!

Pre NCA people were reveling in the buy-to-let market. With home loans being dished out to South Africans at a rate of knots and affordability not even coming into the equation, people were really making alot of money in the buy-to-let market.

South Africans weren't feeling the brunt of the home loans with interest rates being at a lovely 9.5% and living costs, including fuel, bread and your daily expenses were at an all time low.

Many have made a absolute fortune from buy-to-let, but the credit crunch threatens the sector.

Buy-to-let is not dead!!! Even with the falling property prices in South Africa and constant pressure on our interest rates, the only thing that's changed, is that it's become tougher. In fact many landlords are looking chuffed saying prospects are looking bright right now, for the first time in years, because the housing market is weakening. It's become a buyers market again and that's a good thing.

The real trick to buy-to-let though is that your rental needs to cover a minimum on 85% of you home loan. Rising property prices and interest rates have made this target extremely tough to achieve but at the same time have helped increase the rental market and value thereof.

Prices are not falling quite the way we've wanted them to and the penny has still to drop with vendors, but the market is changing. We've had signs of downturns in prices before, but they haven't materialised. This time it's for real...

Keep your eye out for Buy-to-let...

Buy To Let Mortgages - Top 10 Tips

Top Ten Tips for Buy To Let!

1. Choose the Right Property
Location, location, location...


2. Choose the Right Mortgage
Check the amount you can afford. Remember that with the National Credit Act of South Africa it's no longer 30% of your income that's taken into account on your qualification but what you can afford after your expenses have been deducted at the end of the month.


3. Work out Costs and Income
Work out how much your monthly mortgage repayments will be and whether your rental income will exceed this.

Remeber to look and see whether you can afford your mortgage repayments if the interest rate increases again (most likely to go up another 0.5% in the next 6 months). Another thing to consider is that should your tenant dissapear, can you afford to pay the mortgage costs for the next 3 months?


4. Buy To Let 'Hidden Costs'
Don't forget your bond costs. There's registration costs, transfer fees, attorney fees, Stamp Duty and posts and petties. Check out the Bond Costs tab at the top of this page.


5. Choose a Professional Rental Agent
If you choose your rental agent wisely, you may be lucky enough to find someone who, manages your tenant for you. This includes collecting rentals arranging agreements etc. This is not required as they may charge an additional monthly fee but may come in handy if your buy to let appartment is not within driving distance.


6. Ensure you have the Right Insurance
Check with your insurance broker what you need to cover you.
We offer you low premiums and a cash OUTbonus.


7. Sort out your Taxes
You have to pay income tax on any rental income you receive, although you can deduct some expenses.


8. Get a Fully Flexible Mortgage
Make sure that your mortgage originators choose the correct option for you. Buy-To-Let options are available out there.


9. View Buy To Let as a Long-Term Investment
Buy To Let is a long term return. Expect this return to peak at around 5 years in. Don't expect to make a quick profit on rental income.

10. GOLDEN RULE
If you have a extra R500 a month, throw it into your bond account. Where else are you going to get 13% interest on your money. DAILY...

WizardMan Out!