Archive | January 2015

How to pay off your bond in 10 years

Pay off your bond quickerIf you’ve just bought your first home, the day that your mortgage will be fully paid off and the property will really be yours probably seems a very, very long way off.

The good news, however, it that there are tried and tested ways to bring that day much closer – and save yourself tens of thousands of rands in the process.

Did you know, for example, that if you have a R800 000 at 9,25%, you could drop your bond repayment period to 17 years instead of 20, and save R178 000 in interest, just by paying an extra R500 a month into your bond account?

And if you were somehow able to make an additional payment of R2950 every month, you could slash the bond payoff period to 10 years just like that – and save R532 000 worth of interest.

Unfortunately, though, most homeowners just don’t have that amount of extra income to hand every month, especially if they are first-time buyers, so they need to find other ways to chip away at their home loan balance and repayment period. Here are some expert alternative suggestions:

Become a Scrooge. Start eliminating all unnecessary expenses, review your insurance premiums and put a limit on your cellphone usage.

Increase your earnings. Take extra shifts at work, sell something at weekend markets, or look for some evening, holiday or freelance work to bring in extra income that you can put straight into your bond account.

Rent out some space. Even if you don’t have a spare room to rent out, you can perhaps still make some extra cash to put towards your “bond liberation day” by renting out a storage space, garage or carport.

Make a lump-sum payment. If you receive an inheritance, tax refund, or bonus, apply it to the principal balance of your home loan. The interest savings are likely to be better than most other investments.

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What to do if negotiations stall

shutterstock_175786865Although it could take weeks or even months just to find your dream home, that is actually only the first step towards making it your own. Next you need to get the sellers to accept your offer to purchase, and that might not be as easy as you think.

For example, you may have competition from other prospective buyers, or the sellers may be determined to achieve a certain price and unwilling to negotiate, even if that price is above market value.

Unfortunately, just because you’re a serious and financially able buyer, it does not mean that the property sellers are equally keen to seal a deal – or that they are obliged to accept your offer. However it also does not mean that they should be able to keep you on a string while they see if a better offer comes along.

Indeed, if they don’t respond to your offer by the expiry date, or if they come back with a really unrealistic counter-offer, you should cut to the chase. Put the very best offer you can afford to make on the table and let them know that this is your last attempt.

To make it really attractive, you should be sure to get home loan pre-qualification with the help of a reputable mortgage originator such as BetterBond before you go house-hunting, and include this information with your offer so that the sellers will have the assurance that you are able to afford their property and are ready to push the button on home financing.

Then if you still don’t get a positive response, walk away and start looking at other homes. Of course buying a home is personal and emotional, and it may not be easy to “let go” of a home that you’ve fallen in love with. But if your offer was fair and reasonable, you really shouldn’t waste time trying to work out why it didn’t succeed or why the sellers were “just not that into you”.

If they have a change of heart, they will know where to find you – but in the meanwhile, you should rather focus on your main objective, which is home ownership, because if you do that the chances are very good that you will find an equal or even better property.

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