Archive | Uncategorized BetterLife Home Loans RSS for this section

Things to consider before buying a newly-built home

An increasing number of South African homebuyers are electing to buy newly-built properties rather than pre-owned homes, and there are in fact a number of very good reasons for doing so.

No transfer duty

For most buyers, the most important of these is the cash they save because there is no transfer duty payable on homes bought directly from a developer or builder. Instead, VAT is assumed to be included in the purchase price (provided that the developer is registered as a VAT vendor).

Lender pre-approval

Another big plus is that new developments by established building or development companies are often “pre-approved” by a lender, making it much easier for prospective buyers in these projects to obtain home loans.

High chance of customisation opportunity

In addition, residential developers often give buyers the opportunity to choose their own fittings and finishes, and sometimes even the chance to customise the layout of their new home and garden to suit their own needs. On top of that, new homes in South Africa come with certain structural guarantees and must comply with certain “green” design and building principles, making them more eco-friendly and energy-efficient. This all translates into less maintenance and long-term savings for their owners.

The other side of the coin

However, there are also quite a few potential pitfalls that those who are considering a newly-built home need to try and avoid if they want their home-buying experience to be as exciting and fulfilling as it should be. These include:

Deposit scams when buying “off-plan”

Anyone can print a fancy brochure full of floorplans and attractive pictures so you should never sign an offer to purchase a home that has yet to be built unless you have:

  • Seen the land on which it is due to be constructed
  • Established that the developer has a good reputation, is registered with the National Home Builders Registration Council
  • Seen that the property developer has a track record of successfully completed projects.

In addition, you must make sure that any deposit you are asked to pay is going into the trust account of an attorney or any estate agent so you will not lose your money if something goes wrong with the development or the building company.

Long-term developments

It can be exciting and financially rewarding to be one of the first owners in a new development, but you need to know that the project will be finished and fully-developed within a reasonable period. If there are 50 stands, for example, and only 20 homes have been built in the development in the past five years, that may be cause for concern. In this case, you should probably give it a second thought, unless the developer can prove to you that the other 30 stands have now been sold and that they will be completed within the next few months. If this isn’t on the cards, then you could find yourself living on a “building site” for several years and therefore unable to sell because the levy income from only a handful of owners would be insufficient to provide the type of security and the additional facilities that were originally promised – things that would make your home appealing to potential buyers.

Too many “extras” and upgrades

Check your plans and building contract very carefully before you sign for a newly-built home in order to determine exactly what building materials, equipment, fittings and finishes are included in the specifications (and what else may be regarded as “extra” for which you would have to pay an additional amount). Do not make the mistake of assuming that all the top-of-the-line finishes that you see in the developer’s show-home will automatically be included in your home, or take it for granted that the rooms in your home will be the same size. A whole lot of the features you like most may not actually be included in the basic contract and including them could put the home beyond your budget. In addition, if you do decide to opt for upgrades, you should not just accept a whole package. Consider each item to see if you really need it or could live without it, and make certain that everything you choose is individually specified in your building contract along with its price.

No completion or hand-over date

Your contract must contain a date by which your new home will be finished and ready for occupation. If it is not finished by the date stipulated, you will then be entitled to cancel the contract and get back all the money you have paid so far, including the deposit and any progress payments made to a builder. If your contract does not contain this clause, you could find yourself at the mercy of a builder who is taking far too long to finish the project while you are stuck making bond repayments on a home you cannot occupy.

No provision to rectify problems

Even newly-built homes can have faults, and whether it is a cracked tile or a major water leak, you should not have to live with it or pay to get it fixed before you’ve even unpacked. To prevent this from happening, you must make sure that your building contract states that you will have a certain number of days after taking occupation to draw up a “snag” list of defects for the developer or builder to fix before you finally sign the occupation certificate. You should also retain the right to call in an independent and professional home inspector to help you at this point, especially if this is your first home purchase.

Purchasing your own home is one of the most important investments you will ever make, so it’s in your interest to ensure that you’ve considered everything you need to before buying, especially if it’s a newly built home in which you’re interested.

Advertisements

Home loan approvals beat the winter chill

The number of home loans being approved by banks is currently growing at a faster rate than at the beginning of the year, despite the fact that the winter months are usually the slow season for home sales and bond applications.

“This may change in the wake of the interest rate increase that took place at the end of July,” says Shaun Rademeyer, CEO of South Africa’s biggest mortgage originator, BetterLife Home Loans. “Our statistics show that the year-on-year increase in the number of loans being approved has risen from a steady 1% in the first few months of 2015 to 2% in the past two months.” The faster rate of growth, he says, follows continued increases in the number of home loan applications being submitted by prospective homebuyers, and continued decreases in the number of applications being declined by the banks.

What the stats are saying

 The BetterLife Home Loans statistics, which represent 25% of all residential mortgage bonds being registered in the Deeds Office, show a year-on-year increase of 3,2% at the end of July in the number of home loan applications being submitted. The number of applications being declined by the banks fell by 11,7%, following a 15,6% drop in the previous 12 months.

“The picture this paints is of a market that is in healthy equilibrium at the moment. While maintaining strict credit qualification criteria, the banks are keen to lend now and expand their home loan books, meaning a bigger percentage of prospective homeowners are able to qualify for loans”, explains Rademeyer. “However, it must also be said that prospective buyers still have a far greater chance of their loan being approved if they apply through a reputable mortgage originator like BetterLife Home Loans. We have a success rate of 75%, compared to the overall average current approval rate of 60%.” He also says that although the July rate increase and another small rate increase expected later in the year will probably dampen home price growth, they are not expected to significantly slow demand.

“As it is, both lenders and buyers have demonstrated continued confidence in real estate over the past two financially trying years for the economy. That is reflected in the fact that the average home price has risen by over 14% during this period to R953 000, and the average approved bond amount by the same percentage to R788 000.” Over the same period, he notes about 47% of home loan applicants were first-time buyers, and the average home price paid in this sector of the market rose by almost 8% to R648 000, while the average approved bond amount increased by 9% to R601 000.

Further analysis of the latest statistics also reveals that the upper end of the market continues to hold its own, with 28% of all home loans formally granted by the banks in the 12 months to end-July having been for more than R1 million, compared to 27% in the previous 12 months.

Visit http://www.betterlife.co.za/ for more information.

How to choose the best offer for your home

In any town or suburb where the demand from prospective buyers exceeds the number of homes for sale, it is usually only a matter of time before property sellers start to receive competing offers to purchase – and then have to decide which of them to accept or reject. While this may seem like a good problem to have, the decision might not always be as easy to make as you think, mainly because all too often, selling a home is about more than just the money.

The conundrum

What if you receive an offer that is considerably more than your original asking price but on condition that you move out sooner than you were hoping and give the buyer occupation by the end of the month? The reality is that you may not be willing – or able – to accept it. But if it’s an offer you simply can’t refuse, then you will find yourself making the necessary arrangements in order for this to happen. On the other end of the spectrum, you may choose to accept a lower offer from a prospective buyer who has already been pre-approved for bond finance, simply because it will eliminate having to wait for another person to organise finance or sell their current home.

Consider all the factors

Indeed, there are many factors to consider and, as any good estate agent will agree, you really need to look beyond price before you decide – and to resist being pressurised into making a hasty choice that would ultimately be wrong for you. For example: a buyer that makes a good offer but says it is only on the table for a couple of hours, is probably not that serious and if they are, they’re likely to prove difficult to deal with during the transfer process – and who wants that?

So what steps should I take when making a decision?

So, if you do end up in the middle of a “bidding war” for your home, you should start by looking for the offers with the fewest contingencies or “get out” clauses. Ideally, your would-be buyer should not have another property to sell before they will actually be able to buy yours, and should have home loan pre-approval so you can be confident that they really will be able to secure the necessary home loan within a few days.

Next, you may want to consider which prospective buyers are most willing to accommodate your timing with regards to occupation of the property. If you need to delay a move until the end of a school term, for example, or until the end of a work contract, that can have a significant influence on which offer you will accept.

In addition, you should try and find out whether the competing buyers already have the cash in hand needed to pay a deposit, as well as the transfer duty, bond registration costs and legal fees. It is no good accepting a higher offer if you are going to have to wait months for that buyer to get the cash together. At the end of the day, your agent should in fact only be bringing you offers from people who are financially able to buy your property, as well as willing to do so.

The power of negotiation

You also need to make sure that you negotiate transparently and in good faith. For example, if you tell someone who made an offer on a Saturday morning that you’re not going to respond until Monday, you must also tell them that this is because you are expecting further offers after your show house on Sunday. If you then receive several similar offers, you should be open about those as well, and give each of those prospective buyers the opportunity to confirm that this is their “best and highest” offer, or to find out what it would take to make you pick their offer and decide if that’s something they’re willing to do. You must then, however, be prepared to accept the improved offer. Tempting as it may be to keep a “bidding war” going, most buyers won’t like it, and as a result, you then run a very high risk of ending up with no solid offer at all.

There are many factors that need to be taken into consideration when choosing the best offer for your home. It’s a decision that can take quite some time and thought, but because it’s an important one, it’s better to consider everything you need to before drawing that final conclusion.

Buying a home after getting divorced

Getting divorced is tough, and buying a new home afterwards may be just as hard, especially if you are still the co-owner of a property with your former spouse.

This is according to Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s biggest mortgage originator, who says if you were previously part of a two-income household, and qualified for your last bond on that basis, it may be very difficult to qualify for a new home loan on your own, particularly if you are the one making child support payments.

“You will obviously not have the same discretionary income as before, so the banks will probably err on the side of caution when assessing whether you will also be able to manage a monthly bond repayment on your own place.”

As a result, he says you may need time to pay off some debt, raise your credit score and hopefully receive a salary increase.

He says in divorce cases it is also quite common for the husband to move out of the joint home and agree to his ex-wife and children continuing to live there for a few years while he pays the home loan instalments, especially if she has not been working full-time and does not have the means or the credit record to rent or buy a home on her own.

But in such instances he is essentially ‘lending’ his creditworthiness to his ex-wife, and may be foregoing his chance to buy another property for a long time, says Rademeyer.

“And at the very least in such cases, he should ensure that there is a proper agreement in place about how the proceeds will be divided when the house is eventually sold.”

Similarly, he says if you are the “spouse left in the house”, you may want to think twice about trying to buy your ex out and take on the whole mortgage. Even if you are working and can qualify to do so, it will most likely put you under financial strain, as you will also then have to carry all the insurance and maintenance costs on your own, he says.

“In short, you may be better off buying a new, less expensive property in your own name.”

However, all the experts agree that it is a bad idea to try to buy a new home while you are still going through a divorce, he says. For one thing, the stress and emotion of the situation could well lead to you making bad purchase decisions, and for another, lenders will most likely not want to approve any home loan application until the divorce settlement has been agreed.

“And if the joint property is to be sold as part of that settlement, both parties would really be better off renting until that sale has been finalised, if at all possible.”

One reason is that if you are meticulous about paying your rent on time, this will assist you to build up a new credit record as a single person and then, perhaps, to use your half of the sale proceeds as the deposit on a new place, he says.

“At that stage, however, your best course would be to consult a reputable bond originator and obtain pre-approval for a home loan before you go house hunting.”

He says this will give you confidence that you are looking at homes you can afford, and give a seller the confidence to accept your offer to purchase in the knowledge that you will be able to obtain the necessary finance to complete the transaction.

Credits Property24: http://www.property24.com/articles/buying-a-home-after-getting-divorced/22128

What late-blooming homeowners need to know

Although most people have learned a considerable amount by the time they reach their mid- to late-thirties, they may not know much at all about buying a house.

That’s because the age of first-time buyers is now much higher than it was a generation ago, and is still rising in many parts of the world thanks to high levels of student debt among people in their 20s, and a simultaneous trend towards later marriage and family creation.

In SA, for example, the latest statistics from BetterLife Home Loans show that the average age of first-time buyers is now 34. And what that means is that they often also have quite different needs – and financial concerns – from those their parents had when they were acquiring their first properties.

Good schools and short commutes, for example, are likely to be much more important, and not only because these often serve to underpin local home values.

Today’s first-time buyers know that an area with great public schools can save you from having to send your children to costly private schools – and what a difference this could make to their family finances in the future.

In addition, thirty-something buyers are more likely to be settled or settling into a career at a particular company and looking carefully at their commute times, especially if there are two income-earners who must travel in different directions to get to work.

And on top of that, such buyers are often not contemplating a second home purchase until after their children have grown up, so they have to be especially careful when making a choice between urban or suburban living. City living would most likely enable them to cut down on commuting and spend more time with their family, but would probably also mean a higher purchase price and less space and freedom for growing children.

On the other hand, while suburbia tends to offer great value these days as well as child-friendly gardens, living there may well mean having to spend much more time and money to get to work.

Next, buyers in their 30s have to manage their finances more closely, taking into account things like saving for their children’s tertiary education and their own retirement. They may have more established careers and earn more than the previous generation of first-time buyers, and they may well qualify for bigger home loans. But just because they can borrow more does not mean they should.

When calculating how much you may borrow, lenders don’t always include such financial necessities as retirement or university savings and future home improvements, and buyers in their thirties must be realistic about the additional financial responsibilities they will face as they age by not taking on a monthly payment that leaves them too little financial leeway.

And finally, the thirty-somethings must try to avoid draining their savings to cover a deposit and transaction costs such as transfer duty, bond registration and legal fees, which usually have to be paid in cash. Doing so leaves buyers vulnerable to major unexpected expenses or events like major surgery for a child, job loss, or sudden disability.

Indeed rather than put their savings at risk, they should find a lower-priced home and/ or one that will require less expenditure on upkeep.

It’s not always about the highest offer

Home sellers obviously hope to get the highest possible price for their property, but oddly enough, it’s not always the highest offer that gets the house in a multiple-offer situation. There are in fact several reasons why sellers may choose to accept a lower offer and it helps for serious buyers to be aware of what these are, so as to be as prepared as possible when it comes to putting in an offer – here are just a few.

Home loan pre-approval letter

This can be obtained through a reputable mortgage originator such as BetterLife Home Loans. A pre-approval letter tells the seller that you have done all your financial homework, you’re ready to buy in a certain price range and you should have no trouble getting a home loan in a few days. This can be very attractive to certain sellers, particularly those who need to conclude a sale quickly and it can very often be the deciding factor even if you have offered a lower price. In fact, many sellers tend to prefer offers from prospective buyers with pre-approvals over “all cash” offers, which often prove to be quite tricky to deal with and are not always what they appear to be.

Fewer contingencies

The next type of offer which is likely to win in a “bidding war” is the one with the fewest contingencies. Most buyers will need to finance their purchase, so a clause saying that the offer is subject to the buyer being able to raise a home loan is pretty standard. However, should a potential buyer’s offer also be subject to their being able to raise the cash for a deposit and transfer costs, for example, or first being able to sell their existing home, there’s a higher chance that they’re likely to lose out to buyers whose offers are not so encumbered.

Having said that, there are some sellers who actually prefer the sale process to go quite slowly. One reason for this could be so that they can stay on in their home, perhaps until the end of a school year or until a work contract ends so that they are ready to move to their new home. These sellers may of course be more responsive to offers from buyers that are prepared to accommodate their timing.

The promise of care

In addition, sellers who are very attached to their homes or perhaps have painstakingly restored a historical monument, may prefer offers from buyers who promise that their property will be in good hands. The promise of care and respect should not be underestimated, even if it comes from a potential buyer who has offered an amount that is lower than other offers. Having the reassurance that their beloved home will be taken care of and that its architectural heritage will be respected can often mean more to the seller than how much they end up selling it for.

It can be very useful to prospective buyers to bear these points in mind when it comes to them making an offer to purchase. Having said that, it’s important that they don’t put aside any doubts they may have about the home’s condition in order to get the home they want. If they have the slightest suspicion that there may be some hidden defects, they should make their offer subject to a professional home inspection – after all, they wouldn’t want to look back and regret not insisting upon this, especially if there are major problems that could have been solved before the sale goes through. Do what you can to secure your dream home, but not at the cost of it being in the condition you desire from the start.

Here’s why cash isn’t always king…

Even if you have enough cash in the bank to be able to buy your next home outright, it might be quite a risky move to do so.

You will need to weigh up the pros and cons listed below, but often homebuyers find that applying for a home loan is a better course to follow – especially if they enlist the help of a professional mortgage originator such as BetterLife Home Loans to simplify and speed up the application process.

PROS

  • You will save money by not paying interest on a home loan for 20 years. This may seem like an attractive proposition if home loan interest rates are currently higher than the interest you can earn on savings, especially because the savings you make will be tax free.
  • You will avoid having to worry about being approved for a loan – and the bond registration costs.
  • Your credit record will also not come into question – which could be a factor if you have had some money trouble in the past that you think might prevent you from being able to secure a loan.
  • You will have 100% equity in your home which you should theoretically be able to access if you need money for an emergency – and you may find personal satisfaction in owning your home “outright”.
  • You will be an attractive buyer to serious sellers, and the prospect of being able to conclude a faster, simpler deal may even enable you to negotiate a better price.

CONS

  • Buying a home for cash will most likely mean that all your money – or at least a large percentage of it – will be tied up in one asset, leaving you little for other investments or savings that could possibly give you a better return.
  • If you only want to invest in property, you should seriously consider spreading your risk by using your cash to put down deposits on two or more homes and obtaining a loan for the remainder of the purchase price in each case. There could also be tax benefits in owning one or more rental properties as well as the possibility of better returns on your capital.
  • You will have no gearing protection. If all your money is in your home and property prices drop, you will take that percentage drop on the whole amount you paid. For example, if the purchase price was R1m and the market drops by 10%, you will have lost R100 000. But if you only paid a R100 000 deposit in cash and the market drops 10%, your loss will be R10 000. The bank will take the loss on the remainder.
  • Property can take weeks or months to sell, which can be a problem if you need money quickly. Even trying to raise a home loan against your property at that stage can take too long if you have a real emergency.
  • No bank valuation. When you apply for a home loan, the bank will usually send a valuator to see that there is sufficient value in the property to justify the purchase price. This will not happen if you buy for cash so you will have no “third party” confirmation that you are not overpaying.

Obviously, how you pay for your home is a personal decision, but you should not decide to do away with a mortgage and part with a large amount of cash on the spur of the moment. You should seek professional help to make a proper assessment of your overall financial situation and long-term investment plans.

What to do about the eyesore next door

It is sad but true that no matter how great your home looks on show day, it is not likely to attract any offers to purchase if the home next door or across the road is a run-down wreck with a yard like a panel-beater’s workshop.

In fact, if they spot it first, most prospective buyers will just keep driving – and who can blame them? Old car bodies, eye-high grass and weeds and an overflowing bin of “empties” really don’t create the impression of a safe and friendly neighbourhood where people take care of their homes and property values are likely to keep rising.

The problem is, if that property has been in that state for some time, things are unlikely to change unless you intervene. And that’s probably what you will have to do if you want to get your home sold.

The first thing to try is a friendly chat with the owner of the property – assuming, of course, that you are not already at loggerheads with this neighbour. It’s difficult, of course, to tell someone that their home is an eyesore, but you could try a less direct approach and ask for their help in creating the best possible impression of your area because you need to sell your house – while also pointing out that the higher the price you get for yours, the more their property will be worth. If you are not really on chatting terms, a friendly note along the same lines might do the trick.

Secondly, you should be prepared to help, especially if the owners of the dilapidated property are elderly. If it’s a question of peeling paint, a sagging fence or an overgrown garden, it may just be that they have not been able to manage the upkeep and will be delighted if their nice neighbour (you) offers to help them get their property back in shape. They may even be prepared to pay for materials and rubble removal.

If you live in an estate, a third option is to ask your home owners’ association (HOA) to tackle the owner of the unkempt property. One of the main jobs of an HOA is to ensure the harmonious appearance of the estate in order to protect home values.

Alternatively, if you live in a traditional suburb and your neighbours simply refuse to clean up their mess or to let you help, you can report them to your local authority. Most municipalities have by-laws regarding the health, crime and fire hazards that are posed by derelict properties, and can order the owners to either clear the property themselves or pay to have it cleared by a council crew. You should be prepared, however, for this process to take a few months.

Similarly, if the property is unoccupied because it has been repossessed by a bank, you are entitled to insist that the bank clean it up and maintain it so that it does not pull down local property values – but once again should be prepared for quite a wait.

And finally, it really might be worth putting up a wall and/ or planting a hedge to block your view of the problem property, because even if it does get sorted out in time for your show day, who’s to say the owners will keep it that way? Besides, the additional privacy and security could even become an extra selling point for your home.

%d bloggers like this: