Home loans are more affordable, so now's the time to buy

The interest rate cut has made housing loans cheaper, the banks are competing aggressively for home loan business, and there is every reason for buyers to get into the property market.

Approach your own bank, or a mortgage originator who works with all major banks and can likely secure a better deal for you.

This is according to Samuel Seeff, chairman of the Seeff Property Group, who says that it is easier to find a willing bank, provided you qualify for a home loan, and the process is fairly straightforward. You'll need a clear credit record and positive credit score and provide proof of income and FICA verification of your identity and address. If self-employed, the process is a little more involved and you will need additional documentation.

Prequalification and what you can afford

Start with a prequalification to avoid disappointment and know exactly how much you can buy for. Approach your own bank, or a mortgage originator who works with all major banks and can likely secure a better deal for you, says Seeff.

Work out how much you can afford here.
 

Also read: Applying for a home loan? Good reasons to use a bond originator
 

You should budget for around 10% to 15% of the purchase price as a deposit, or apply for a 100% home loan. Additionally, you will need to pay transfer duty if the property is above R900 000, and transaction costs. On a R1.5 million property, this would amount to about R90 500, inclusive of bond costs.

Calculate your bond and transfer costs here.
 

Getting a home loan and five days to shop around

Once you have found the right property and your offer to purchase is accepted, a formal application for a home loan will need to be done. Your agent will assist with this with the help of a mortgage originator, or via your own bank.

In terms of the National Credit Act, the bank will provide a 'quotation' or pre-agreement setting out the loan amount, proposed interest rate and terms upon which they are prepared to grant the loan. The applicant (borrower) then has five business days to shop around for a better deal, or to accept the quote.

Sean Guy, sectional title division manager for Seeff Southern Suburbs, says the banks essentially look at the buyer's affordability of the loan and their assessed value of the property, and will need to satisfy itself that there is sufficient equity in the property. If the bank's valuer does not find value, it may still grant a bond, but based on the lower valuation of the property.

Assuming a property is sold for R2 million subject to an 80% bond, but the bank only finds R1.8 million in value and consequently offers an 80% loan on that lower value, the buyer will be left with having to make up the shortfall. If unable to do so, the sale would likely become void. This again just drives the point of prequalification and ensuring that you invest wisely and work with a credible agent, says Guy.

Property types suitable for home loans

Freestanding residential dwellings are generally considered good security for mortgage lending, provided it is habitable and insurable and all necessary services (water and electricity supply) are in place, and that the bank can find sufficient value. Sectional title schemes need to be in a good financial standing. Vacant land is not suitable for home loans unless it comes with a plan to build within six months which must comply with strict building requirements and a specific process to be followed.

The National Credit Act (NCA) and your home loan

The National Credit Act seeks to promote a fair and non-discriminatory marketplace for access to consumer credit and places responsibilities on credit providers to report information to the National Credit Register or a credit bureau when concluding or amending a credit agreement, which includes home loan agreements. Details to be recorded include the details of the borrower, principal debt, period of repayment, interest rate and monthly repayment amounts.

Acceptance of the home loan quote is subject to the bank's standard terms and conditions, which will be contained in the pre-agreement attached to the quote. In terms of the NCA, all terms and conditions must be clearly explained to the borrower before the agreement is signed.

You will receive a copy of the credit agreement, as well as a copy of the title deed, and the original will be retained by the bank until the home loan is paid in full and the bond cancelled.