|
As SA Reserve Bank governor Tito Mboweni contemplates raising the interest rate yet again, many estate agents are reporting that the higher cost of borrowing is affecting lower to middle-income earners the most.
Amid soaring food and fuel prices, it has become a case of struggling to find the extra money needed to keep up with repayments.
Making things worse for those who have hit particularly hard times is that the number of buyers has shrunk, so it has become difficult to sell fast - or at a price that produces the desired profit (read Properties for sale: double last year's number)
Banks are reluctant to repossess properties, partly because it is a hassle and partly because they do not want to be accused of "reckless lending" - now frowned upon in the National Credit Act.
They have urged their clients to contact them with a view to receiving some assistance through these tough times if they need it (see How the hike affects you)
Here are some ways to help ease the financial pain:
1. Extend the life of your loan.
If you have a 20-year loan, you may find that by extending the term to 30 years you can substantially reduce your monthly instalments. A longer loan term does mean you pay more interest for your debt in the long run. However, if you have an access or savings' facility you can make top-up payments as soon as your financial situation improves and, in so doing, cut that bill.
Amdec Property Development's head of bond origination Ronell Killian says: "Many people apply for a 30-year repayment period as a strategic buffer mechanism to ensure their bond repayments remain affordable should interest rates increase."
This does not necessarily increase the amount of interest paid, says Killian, as interest is charged on the outstanding balance of the loan each month. This is unlike vehicle finance where the full interest amount is paid first and the balance of the loan only reduces once all the interest is paid. Which brings us to the next point;
2. Exchange your car for a more modest set of wheels.
Cars chew through cash and their value plummets quickly over the term of your loan. They're not a good investment. What's more, by opting for something less flashy you could find you spend far less on fuel each month - and fuel, these days, is a major household expense.
3. Pay off the interest only, for now.
There are mortgages that allow you to repay only the interest for a period. This is a good idea if you can afford far less for your home loan, but bear in mind this is not the best strategy from a long-term investment perspective. The quicker you pay off the capital you owe, the less interest you will be billed. Bear in mind, though, that remortgaging will incur extra costs.
4. Draw up a list of expenses and then trim the fat.
In recent times, easy debt on credit cards has meant people haven't had to save or plan what they will spend their money on. Now, most of that extra money has dried up. Take this opportunity to scrutinize your spending patterns - and cut out what you don't need. You will also find that getting fresh quotes for services and even insurance can help reduce monthly bills. Car insurance, for example, should decrease over time because your car is worth less.
5. Kill other debt that is getting in the way of your home loan.
Car loans and credit card debt are expensive. Try to wipe out these debts as quickly as possible.
Whatever you do, don't:
Skip home loan repayments. Just missing one can dramatically boost your interest bill. Plus, it will make your bank manager unhappy and you could earn a black mark against your name, making it much harder to source a loan in future; or
Blow the value of your home on things that aren't assets. Some home loans are wrapped into transactional bank accounts, making it very easy for you to dip into the value of your property. Avoid this "one account" for all option - unless you are obsessed with keeping tabs on your spending. You may find you need to use your home loan to kill other debts that have got out of control. Not a great idea, but still better than falling behind on loan repayments altogether.
THE PROCESS OF BUYING A HOME
Buying a home is usually the single biggest family investment you will make in your lifetime. It is not only a major financial commitment but can also be an emotional experience.
CHOOSING THE HOME THAT IS BEST FOR YOU
It will ultimately depend on your personal preference whether you choose a free-standing property, a smallholding or sectional title such as a flat or townhouse. Factors such as security, privacy, space, originality in design and convenience have to be taken into account.
"GOLDEN RULE" FOR BUYING A HOME
Location, Location, Location are the three golden rules for buying a home, but issues such as convenience, proximity to work, family, friends, schools and investment prospects will also be considered.
Crucial however, is ensuring that you secure the correct price. Buying property in the right location and at the right price, will add to the investment value of your home. See Pricing section under the Sellers menu
QUALIFICATION CRITERIA
We will assist buyers with their financing needs through the largest financial Institutions in South Africa. The maximum repayment term on residential or sectional title is 30 years. Vacant land is repayable over a maximum of fifteen (15) years.
WHO QUALIFIES?
Individuals (single or joint) with a regular and reliable source of income of at least R3 500 per month. Any person whose employer has a group scheme arrangement with any Financial Institution. A close corporation, trust or company that was formed for the purpose of owning a residential property (the income of the individual (being a member, trustee, or director) is assessed for affordability). Note that the monthly home loan repayments may not exceed 30% of total monthly income (single or joint).
THE PROCESS OF SELLING YOUR HOME
Selling your home could be an extremely painful experience if not handled correctly. Breaking the connection with the security and memories of your home is not easy. On the other hand however, the prospect of your new home may promise exciting opportunities. It is therefore important that the person and company who will assist you in the sale should be selected with extreme care. Trust, experience and knowledge are the attributes needed to ensure a smooth and hassle free selling process.
When you decide to sell your home there are mainly two (2) options available to you:
SELLING PRIVATELY
Many people consider this option, because they have a perception that they will be saving commission. This is actually the most dangerous decision a seller could make. Privately sold properties on average are 12% higher than market value due to the inability of the private seller and/or private buyer to correctly price the unit. These sales are usually controlled by emotion. Selling privately is a complete breach of security, as you invite strangers into your family home. Usually the lack of negotiation skills, knowledge of market trends and contract buyers and sellers alike can run into major difficulty and financial trouble during this process. A seller opens himself up for a double commission claim when selling privately, although this is the exception and not the rule - it is currently a real factor in the South African market. Even with all these pitfalls, some people prefer to deal with private sellers -- that is their choice -- but ensure you know the risks involved.
SELECTING THE RIGHT AGENT
Your estate agent should be selected as carefully as you would a new doctor or attorney, after all this person will after all be working with your family's largest investment, your home. There are many inexperienced and unqualified agents in the market place - do not select your agent on promises but rather action. The estate agent's responsibility is to successfully market your property and that's what they get paid for i.e. marketing not selling.
Your qualified estate agent should be able to advise, control and manage the following:
The correct marketing price According to price analysis done through the years it has shown that you will achieve your highest selling price in the first 3 - 4 weeks of marketing your home. Pricing therefore becomes a crucial part of marketing. A qualified estate agent should be able to provide you with supporting documentation for a suggested marketing price. This is called a comparative market analysis.
Marketing your home
An experienced agent will provide you with a marketing schedule of activities. This action plan acts as a road map to your desired destination. For Sale Boards and advertising alone, does not sell houses.
Selling your home
A qualified agent will be able to best advise you on appearance and presentation of your home. This agent will manage the process of sale, contracts and finance. A good agent will be your partner throughout the selling process.
PRICING YOUR HOME CORRECTLY
The Secret to a successful sale starts at PRICING your Home correctly … It takes on average 45 - 60 days to market and sell a property successfully A SELLER usually receives the highest offers within the first 3 - 4 weeks due to more buyer activity. After the 4th week it is only NEW Buyers that may view the home. The longer you stay in the market the more your home "depreciates" … Although many people believe that "We can always reduce the price …" it is actually the opposite that is true. The longer your home stays in the active market the more "Shop-Soiled" it becomes. When buyers notice that a particular property has been in the market for a prolonged period they believe that they will also "battle" to sell the house when they wish to sell. This stigma makes buyers believe that the house is not a good investment.
|
|
