If you’re thinking of buying a home in the current buyer’s market, there are issues you need to resolve first. We spoke to the experts for advice
Q: I qualify for a Finance-Linked Individual Subsidy Programme (Flisp) subsidy and am looking for a property to buy. Is there a limit to the price of the property I can purchase with the combination of my own money and the subsidy?
A: There is no limit to the purchase price that one can qualify for but the buyer’s income usually determines the value of the home loan one can qualify for. For example, based on the lending criteria of the financial institutions, usually a 30% of income vs home loan repayment yardstick rule is applied. This means that a home buyer with an income of R22 000 a month (equal to the maximum income range for a Flisp subsidy) ought to qualify for a home loan of R835 000 based on the current prime lending rate of 7.25% per annum calculated over a repayment term of 20 years. If the home loan repayment is stretched to 30 years, the home buyer can qualify for a home loan of up to R930 000. The interest rate that a financial institution will offer the buyer will depend on their risk exposure, such as their credit score and debt repayment-to-income ratio. – Meyer de Waal, director of MDW Inc Attorneys
Q: I am at the beginning of my home ownership journey, getting the documents ready to apply for home loan pre-approval and getting an idea of what property I want to buy. What should I bear in mind?
A: Do some house-hunting homework and know your needs. Think about accessibility to work, public transport routes, schools and shops. You should view as many properties as possible, make comparisons, draw up a shortlist and then sleep on it. Do not guess or assume anything. Ask the seller or estate agent as many questions as you can until you are totally satisfied. Viewing the selected property several times will help you make a final decision. It is your responsibility to ensure that a prospective home will not require excessive future maintenance. You are allowed to question the reason for selling and ask about the number of other sales taking place in the area. – Buyisile Maseko, growth head at FNB Home Finance
Q: We are considering applying for a home loan so that we can finally get on to the property ladder. Should we apply to the banks directly or use a mortgage/ bond originator?
A: The major difference between a mortgage originator and a bank is that a mortgage originator acts as a middleman between multiple banks and the customer. If a customer approaches the bank directly, it’s up to the customer to shop around and approach multiple banks to get the best interest rate. Both options have their pros and cons and should be carefully considered when you are purchasing a new home.
- You may already have built up a track record, which could benefit you in your overall pricing/ rate on your home loan.
- The benefits of a banker or branch consultant to assist you through the process.
- Additional value propositions or discounts could be passed to you directly for working through your bank.
- You lose the option of multiple quotes, unless you shop around directly with other banks.
Bond originator pros:
- You receive multiple quotes and can take the option which best suits you.
- The mortgage originator could assist in compiling the paperwork on your behalf.
Bond originator cons:
- There could be a delay in the process as the bond originator needs to submit and obtain feedback from all the banks.
- You might miss out on additional benefits through approaching the bank directly as the bond originator needs to be paid commission by the bank and therefore some benefits might not be passed to you as a customer due to the acquisition costs incurred through a bond originator. – Buyisile Maseko, growth head at FNB Home Finance
Q: Due to the lockdown and my company cutting my salary, I have to move out of my rented apartment into something cheaper for the next few months. I have managed to find a place but the owner of the property (which is not usually let) says he does not want to sign a lease as neither of us knows how long our current situations will last. He says it will be easier for us to just communicate about when we will need to terminate our verbal agreement. Is this wise?
A: Many tenants are facing financial hardship and having to move quickly because they can no longer afford the rent on their current home, while many cashstrapped homeowners are trying to let out any spare space they have to make ends meet. But whether you’re a tenant or a landlord in this situation, you should always make sure your rental agreement is in writing. This is not only a requirement of the Rental Housing Act but the best way to avoid confusion or any future disputes about the terms of your rental agreement – especially if this was concluded in haste. A standard written lease clearly sets out all the terms and conditions of your agreement and all the rights and responsibilities of each party.
At the very least your lease document should contain the following information:
◆ The contact details of both landlord and tenant, including their phone numbers and emergency numbers.
◆ The address and description of the rental property.
◆ Details of any deposit paid, the monthly rent and the proposed duration of the tenancy.
◆ Landlord and tenant responsibilities and requirements with regard to maintenance and security, for example.
◆ The procedures and notice required to cancel the lease or renew it.
◆ A list of existing property defects, compiled at a joint ingoing inspection of the rental property, and signed by both parties before the tenant takes occupation. For the sake of clarity, the lease should also detail what is to be done with the deposit a tenant pays. – Gerhard Kotzé, managing director of the RealNet estate agency group
* Get a quick and affordable pre-approval:https://www.iolproperty.co.za/mortgage_application_signup.jsp