SA Budget 2012 - Yes – You CAN Get That Elusive Home Loan In 2012

Yes – You CAN Get That Elusive Home Loan In 2012

It seems as if the light is shining at the end of the proverbial tunnel for those that need to buy homes and need bonds in order to do so. According to Standard Bank, the largest player in the home loans field, it is still possible to get that loan that you need.

Pravin Gordhan will soon put us in the picture with his much-awaited 2012 budget speech, and this, too will have an all-important impact on the lending and housing market in SA in 2012.

Here are a couple of practical points to take into consideration prior to approaching your bank for that all-important loan:

·         Do a little research on the area.

·         Find out exactly what kind of condition the house is in.

·         Do some research into your credit history; this is easily available online and you can make any necessary adjustments if errors appear on your credit report. Compare these reports from the three largest credit bureaus in SA.

·         Armed with this kind of knowledge you will always have the upper hand.

·         Did you know that there are a high percentage of errors that occur on credit reports? These should always be checked on a regular basis so that your credit report is in a healthy state.

·         Ask a professional estate agent to assist in getting a comparable price list of the homes in the area; they have access to graphs and information that is pertinent to this.

·         Obviously, you will have to be able to afford the property; affordability is the key in this exercise.

·         If you are concerned that the budget will affect your already tight purse strings, it might be best to wait for after Pravin Gordhan has delivered his SA budget speech, and only then approach your bank for a loan.

·         You might feel that the budget does not really affect you in your everyday life; but if it is more taxes we have to pay, higher interest rates on our borrowed money, more to fork out on that glass of wine or packet of cigarettes, then it is wisest to hold on a little longer before signing for that much-desired property you already have your eye on.

·         Put money aside when buying your home; there are always costs that are hidden.

·         100% bonds are not common, so ensure that there is sufficient for transfer duties, deposits and anything else pertaining to buying your property.

·         Remember to add in attorneys’ fees and registration costs, too.

·         Hidden expenses need to be addressed, as you will always find there is a lot to be spent on added extras such as electricity deposits and beefing up security.

·         Don’t forget to build in your home insurance, too.

If you feel you might be a little too tight it is a good idea to wait and see what the 2012 budget speech will do for (or against) our borrowed monies from banking institutions; it is always bet to make these important decisions through careful planning.

Handy Tips for Mortgage Originator Offices

Difference between a building loan and additions/alterations to an existing property.

a. Building Loan
A building loan is a home loan used to finance the construction of a dwelling on vacant land, i.e.

1. The client is purchasing the vacant land and wishes to building a dwelling
2. The client owns the vacant land and wishes to build a dwelling
3. The client wishes to switch vacant land and then apply to build a dwelling

The following additional documents will be required:

- Contract
- Approved plans
- Schedule of finishes
- NHBRC certificates

B. Additions/Alterations to an existing property
This is treated as an ordinary loan and could occur in the following instances:

1. The client is purchasing an existing dwelling but wants to also apply for further funds to undertake additions or alterations. As this would then be more than 100% of the purchase price these application must be capture as a further building loan. There must please be a note confirming that this is a further building loan for building alterations / additions

2. The client is undertaking additions/alterations on his existing property that is bonded to Nedbank. This is treated as a normal further loan with our without registration.

The following additional documents will be required:

- Quotes or the contract
- Approved plans if structural changes
- NHBRC certificates
- Schedule of finishes

If the application is approved these funds will be held on retention and the funds paid out as work progresses after registration of the bond.

MAKING DRAW DOWNS ON A BUILDING LOAN

I think most people really struggle when it comes to how the banks pay builders when you have a building mortgage or bond.

Mortgage Originators understand this, but often this is lost on the client until its too late.

So here are some tips, hints, tricks etc from your favourite SA property info site!!!

TAKE CAREFUL NOTE OF THE ITEMS IN RED.

ALWAYS READ THE SMALL PRINT!!!!

BUILDING LOAN/MORTGAGE - If you have paid for the land and now want to start building, make sure if you have an ACCESS type bond, that you move your access money into a different bank account while the building bond starts, else it will be frozen. Bummer.

PAYMENTS - PROGRESS PAYMENTS

Your builder will want payments for work that he has done. This is called progress payments.

The lending bank, will make these payments to the builder:

1. After receiving a signed request form to release funds from you. You can get these at any branch or ask your mortgage originator to get them. Make sure it gets to the bank 5 days before the money is required.

2. The payment will be based on the estimated cost of building work completed.

3. The lending bank will always calculate this payment and ensure that sufficient money is retained to complete your building. - They look after you.

4. This retained money is calculated by the banks. They value the work against the building contract.

5. Remember, get a reputable builder BECAUSE the bank will not pay for poor workmanship nor will they pay for building material on-site.

6. The bank WILL ONLY pay on the assessors amount not what you or the builder estimate (So dont ask for more than what has been done).

7. Never, never, never - sign a blank progress payment form and give it to the builder.

8. Its good to have a solid honest payment relationship with your builder, because he will always want payments. YOU ARE RESPONSIBLE FOR THIS - NOT THE BANK.

9. Normally 3 to 4 progress payments to complete your mansion.

SO IS THIS ALL I AM LIABLE FOR; OR ARE THERE OTHER COSTS RELATED TO PROGRESS PAYMENTS? YES YES YES YES YES

NOTE: Interim interest is calculated on each of these progress payment amounts. This is over and above your loan.

WHAT TO DO:

1. Because part of your original loan money will be used up by interim interest you may not have enough money from your loan.

2. Make some partial payments to cover the interim interest as soon as the first progress payment has been made by the bank.

3. Or you must save some money and keep this as a provision to cover the interim interest since this can add up over the building period.

4. Dont get caught having to find a portion of the final progress payment from other funds.

SHORTFALL? YES/NO

Progress payments may differ from the actual cost versus the banks estimated cost.

Keep some funds available right up front before you start building, to overcome a possible shortfall.

Why the shortfall occurs is normally due to:

1. Loan you request is less than the contract price.

2.The builders contract price is LESS than the banks estimated cost to complete the building.

So remember that the bank, in the case of a shortfall, will insist that you have funds from other sources and these funds must be applied to the property prior to the Bank considering progress payments against the bond.

FINAL PAYMENT

When the builder completes the contract and asks for final payment:

1. Check that you are 100% happy.

2. Only then sign off your happy letter for the bank.

3. get your certificate of occupation from the local authorityIn addition, a signed copy of the certificate of occupancy, which is obtainable from the local authority

4. Lastly CHECK if the banks requested anything else when they granted your loan.

READ the SMALLPRINT

Then the last payment will be made.

Simple - HA! Never. Enjoy your mansion.