HELPING YOU EVERY STEP OF THE WAY

Just like houses, your questions come in a range of styles and sizes to suit different circumstances. Read through the following and contact us should you have any other questions.

At No cost to You, we can assist with the following professional services:

  • New Loan
  • Further Loans on your Existing Property
  • Building Loan
  • Insurance Referral
  • Commercial Finance Referral

FREQUENTLY ASKED QUESTIONS

IS LIFE INSURANCE ALWAYS A REQUIREMENT?

Life Insurance is not always a requirement, but on most loans below R1000 000.00 banks often include a condition for life insurance to be taken out.

WHAT IS HOME OWNER COVER (HOC) COVER AND IS IT A CONDITION FROM THE BANK TO HAVE HOC IN PLACE?

Yes, HOC is always a condition. When you buy a unit in a sectional title development the insurance is normally included in the levy and the body corporate will provide proof of cover to the attorneys prior to registration. If you buy a free standing property, the bank will quote you on HOC. The bank normally gives you the option to accept an annual premium or a monthly premium. You can however also secure your own HOC, but will need to ensure that you present a Full Policy Schedule, where the banks interest as the bond holder is noted and that the property is insured for the full replacement value, as determined by the banks valuator. The policy needs to provide detail in terms of what cover it includes (eg does it include mudslides, boundary walls, paving, etc.).

HOC covers damage to the property due to floods, fire etc, but not the household contents. Household contents will need to be insured separately.

CAN I PAY MORE INTO MY BOND THAN THE REQUESTED PAYMENT AND REDUCE THE LOAN TERM?

Yes, you can always pay in more and by doing so reduce the loan term and interest charged.

SHOULD I TAKE THE LOAN TERM OVER 20 YEARS OR 30 YEARS?

The banks offer different loan terms and although some banks prefer 20 year loan terms, other may consider 25 and 30 year loan terms. A longer loan term will make affordability slightly easier and assist in a slightly lower monthly repayment, however the extra 10 years, will result in substantially higher interest charged.

CAN I LEND EXTRA MONEY FOR RENOVATIONS TO THE PROPERTY?

Some of the banks may consider this. You will need to provide a formal quotation for the intended renovations. If your credit score and affordability allowed a 100% bond as well as the extra money for the renovations, they will pay the full purchase price out on registration of the bond, but the money for the renovations will be held back on retention and only paid out, once the work had been concluded.

HOW WILL THE BANK ASSESS THE INTENDED RENOVATIONS?

The banks valuators will take into consideration the comparable selling prices of other properties in the same area, to determine if the intended renovations will add value to the property or whether the intended renovations are purely cosmetic. The banks are very careful not to over capitalize on properties.

WHAT FEES CAN I EXPECT WHEN I BUY PROPERTY?

With any new purchase there are Transfer Fees and Bond Registration Fees. Most banks prefer the transferring attorney and bond attorney to be different attorneys, but even if both the transfer and bond registration is handled by the same firm, there will be two departments dealing with the transaction, which means there will still be a separate account for the transfer and a separate account for the bond registration. The Attorney costs are set by the Law Society.

In addition to the attorney costs, the banks also charge Initiation Fees.

WILL THE BANK CONSIDER INCOME I RECEIVE FROM A SIDELINE BUSINESS, WHILST BEING FULL TIME EMPLOYED BY AN EMPLOYER?

The bank will only use income from a sideline business, if you can present Financial Statements for the business for 2 – 3 years. You will also need to provide your most recent 6 months non-internet bank statements, where the business income reflects. It is therefor important to understand the importance of banking all your cash earnings, as the bank will only consider income, which they can verify in the bank as well as on the Financials Statements.

CAN I USE MY OWN LIFE INSURANCE? 

Yes, you can. You will need to obtain a Comprehensive Life Policy, which will need to be presented to the bank for approval. Different banks have different procedures in place and in some cases it may be easier to change the Life Cover after registration.

WHAT IS AN ACCESS BOND?

An access bond (also referred to as a flexi bond) is a facility on your home loan, that will allow you to pay extra payments (over and above the minimum amount required) into your bond and still have access to withdraw the funds again when needed. While the extra funds are lying in your access bond, your interest will be calculated on the lower outstanding balance, which means you will also reduce the loan term.

DOES IT REALLY HELP TO PAY IN EXTRA MONEY INTO MY BOND?

Yes!! To give you an idea – a bond repayment on a R500 000.00 home loan on 10.25% interest rate over a 20 year loan term will be R4908.22. (Excluding insurance and admin fees). By paying in an extra R500.00 per month, you will reduce the loan term to 15.25 years and save R186 538.00 in interest over the total term.

ARE THERE ANY PENALTIES FOR SETTLING MY BOND EARLIER?

You can settle your bond in full, without any penalties. Only if you plan to formally close the bond, you will need to give the bank 90 days notice of your intention to close your bond. You can therefor pay in as much extra as you can and leave a small outstanding balance without any penalties charged.

HOW IS INTEREST CALCULATED ON VEHICLE FINANCE DIFFERENT FROM A HOME LOAN? 

The interest charged on vehicle finance is calculated upfront for the total loan term and added to the initial loan amount. This causes the loan amount normally being higher than the value of the vehicle for the first few years. With a home loan, you interest is not calculated upfront, but on the daily outstanding balance, which means the more you pay in extra into your bond, the quicker your outstanding loan balance and the interest calculated hereon will drop.

CAN I LEND MORE THAN THE PURCHASE PRICE OF THE PROPERTY FOR TRANSFER COSTS OR RECONSOLIDATING DEBT?

There are only two banks at this stage than can consider adding the costs to the loan – FNB and Standard Bank (**Specific Conditions apply)

FNB: You need to adhere to the affordable housing conditions and earn below R25 000.00, the property should not be more than R650 000.00 and you should be a first time buyer.

Standard Bank: The purchase price and the costs added, should not exceed a R1 million and you should be a first-time buyer.

The other banks do not offer a costs inclusive product.

HOW DOES THE BANK CALCULATE MY AFFORDABILITY?

There are 2 Calculations:

  1. The general rule is that they will use 30% of your Gross Income (Not Cost to Company) with any additional income, which you can prove with supporting documents, other than bank statements to determine the potential amount, you can qualify for on all property exposure together. (This includes your investment properties as well as your main property, that you live in)
  2. In addition, they will check all contractual commitments from the various credit bureaus as well as living expenses. This will be deducted from the nett income paid into your bank account, after salary deductions, to determine that you have sufficient income available to service a new homeloan.
WILL THE BANK CONSIDER RENTAL INCOME?

The bank will use rental income, if we can show the rental income in your bank account for the past 6 months and supply a supporting lease agreement, which is still valid for at least another 6 months. All the banks have different criteria regarding the use of rental income and most banks will only use a percentage of the rental income.

WHAT IS THE IMPACT OF BEING MARRIED COP?

When married in community of property (COP), you can not buy property separately from each other. This means that even if your spouse’s income is not required to service the home loan, you will need to include his/her ID number to the application and the property will need to be registered in both names.

WHAT IF MY SPOUSE HAS A POOR CREDIT HISTORY AND WE ARE MARRIED COP?

It is essential that he/she first clears their name and ensure that the credit score is at an acceptable level. If one of the applicants has a poor credit profile, the entire application will be affected negatively.

WILL IT HELP TO GET A SURETY IF MY CREDIT RECORD IS NOT GOOD?

In general, surety is no longer accepted. In exceptional cases, credit may consider it with some of the banks.

WHAT WILL HAPPEN IF THE BANKS VALUATOR DOES NOT FIND VALUE IN THE PROPERTY?

The banks valuator’s mandate is to confirm that there is sufficient security on the property to approve the loan. If the property holds lower value, the bank will either decline the application completely or make a lower offer.

IS IT POSSIBLE THAT THE BANK’S VALUATOR FINDS VALUE IN THE PROPERTY, BUT STILL REJECTS THE PROPERTY FOR FUNDING?

Yes, if the valuator feels the condition of the property is unacceptable for bonding, you will find the bank will say, although the value of the property may be in place, they prefer not to take a property with major flaws on their books, due to poor security.

HOW WILL THE FUNDS THAT THE BANK APPROVES FOR RENOVATIONS BE MANAGED?

The approved funds will not be paid as a lump sum on registration. It will be kept on retention and only once the renovations had been concluded and the banks valuator had inspected the work, the funds will be paid out in progress payments.

HOW DO THE BANKS DETERMINE THE INTEREST RATE ON THE LOAN?

The interest rate will be determined based on the risk profile of the client.

This will be calculated based on the client’s internal credit behavior within the bank, as well as the clients Credit Bureau Rating. Clients with good credit ratings generally receive better interest rates, than clients who have a lower credit rating.

The Loan to Value (LTV), also plays a role and when you can commit to a deposit, you can expect a better interest rate, than when applying for a 100% homeloan.

Professional Qualifications also have an impact on your interest rate and if you have a Degree, we would recommend sending a copy thereof on to us.

CAN THE INTEREST RATE BE NEGOTIATED?

Yes, we negotiate the best interest rate amongst the banks. We normally try to keep clients with their own banks and should another bank offer a better rate, we will use that as negotiating tool with your own bank to secure the best possible loan amount and interest rate. We often see client’s own banks, not offering the best interest rate upfront and only after showing them on a competing offer from another bank, they are normally keen to reconsider. We therefor play a valuable role in handling the negotiations on your behalf, giving you peace of mind, that you will receive the best outcome in the end.

WHAT IS AN INITIATION FEE, AND CAN IT BE WAIVED?

This is a fee that the banks charge for opening the bond. It is standard fee with all banks and normally R5985.00. When buying a property in the name of a Legal Entity, you can expect a higher Initiation Fee. This fee is unfortunately not negotiable, but most of the banks normally include the initiation fee in the loan, which means you don’t need to pay it upfront. Keep in mind that when the bank includes the initiation fees to the loan, you are encouraged to pay the amount into your homeloan immediately after registration, in order to avoid interest being charged on this amount as well.

Email

info@paynelessbonds.co.za

Phone

+(27) 87 151 4712

+(27) 11 662 2396

+(27) 83 707 1684

Address

1182 KATLAGTER STREET
FEATHERBROOKE ESTATE
1746 GAUTENG, SOUTH AFRICA

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