Pure Property Management

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Credit – Moneyweb.co.za

For those of us who aren’t trust fund babies, a home loan is pretty much unavoidable if you want to buy a house.

And due to the duration of a standard home loan, doing it this way means you are going to be paying a lot of interest – a 20-year home loan means you will pay around double the purchase price of the house after you factor in the interest.

A R1 million bond over 20 years with an interest rate of prime (7%) will have a monthly instalment of R7 753.

Paying the minimum means the bond is paid off in 20 years (240 months) and the total interest bill will be around R860 000.

So how do you reduce the amount of interest you pay and the time it takes you to own your house outright?

1. Have a deposit

A 10% deposit reduces the bond amount to R900 000.

That means the monthly instalment is now R6 978 (which is around R775 less per month). The total interest bill becomes R775 000 (which is R86 000 less than the R1 million bond.)

A deposit is also a great way of showing the bank you are a good financial planner (since you were able to save up towards a deposit). It also reduces the bank’s risk. It is now only lending R900 000 for something that is technically worth R1 million. This gives it a bit of a cushion if something goes wrong.

All this means that having a deposit not only saves you a lot of interest, but will also improve your chances of getting a bond approved and can help you negotiate a better interest rate (which, as you will see next, can save you even more).

2. Negotiate a better interest rate

When applying for a home loan, apply at all the banks (not just the people you bank with). Use a bond originator as well. Then wait and compare the banks’ offers, and negotiate using the best offer you received as ammunition. When you are done, go back one more time and ask the bank if that is their best offer.

This seems like a lot of effort. Is it worth it? Well, even a small reduction in the interest rate of your bond can pack a big punch! A 0.25% reduction on a R1 million bond reduces the instalment to R7 604 per month and saves you R35 800 in interest!

3. Pay extra if you can

The interest on your home loan is calculated daily. That means if you make additional payments into your bond, it immediately starts reducing your interest bill.Even an extra R200 a month:

• Saves you about R52 000 in interest, and
• Means your bond is paid off one year faster.

4. Negotiate the purchase price/buy for less

Negotiating the purchase price of the property and/or buying a house for a little bit less than you can afford can save you thousands of rands of interest. A lower home loan amount has a huge impact on the total cost of a home loan – especially if you put the savings into the bond as an extra payment.A R900 000 home loan has an instalment that is around R775 a month less than the instalment on a R1 million home loan. If you put that R775 monthly saving back into the bond:

• Interest saved: around R250 000, and
• Bond paid off in around 16 years.

5. The biggest hack – do all of the above

What if you managed to:
– Buy for R900 000 (instead of R1 million);
– Put down a 10% deposit (a R90 000 deposit means a home loan of R810 000);
– Got your interest rate down to 6.75%;
– Put all savings back into your bond; and
– Paid an extra R200 a month?

Congratulations! You have just saved yourself R460 000 in interest and paid off your home loan in 13 years instead of 20!

You’re not done saving …

When you are done implementing these hacks, take note of this: some banks allow you to renegotiate your home loan interest rate once the loan has been running for a while. If you have been a good payer, and especially if you are ahead of your payments, you can probably get your bank to squeeze out some more interest rate savings for you – but you have to ask (they won’t just do it out of the goodness of their hearts!).

I managed to get the bank to lower my interest rate by simply dropping them a mail and asking.

Just be aware that only some banks will renegotiate your rate; others won’t.

And finally, if you want to stay on top of your home loan and check out the dent you are making with extra payments, download this home loan tracking spreadsheet and watch how your home loan freedom date gets pulled closer and closer.

This article was originally published on the Stealthy Wealth blog here. Tweet

Credit Original Article to Businesstech

Rapid infrastructural development coupled with a desirable lifestyle have traditionally been significant markers resulting in sustained growth of a real estate market, notes real estate firm, Seeff.

On the North Coast of KwaZulu-Natal, a consistent amount of property is continuing to be sold, even during these unprecedented times and this demand clearly underscores the persistent popularity of the area, it said during a recent webinar session of “Let’s Talk Property”.

“Hot Spotting” is considered an informed speculation of where the next ‘big boom’ location will be. In the live poll taken during the webinar, the KZN North Coast came out on top with 39% compared with the other national areas, the next closest area being the Atlantic Seaboard at 27%.

Carl van den Berg, business development executive from Private Property shared some consumer behaviour insights which showed that even during this lockdown period, people have been searching online with “intent” and one of the most searched for property sectors has been for new developments.

The North Coast has always been a popular holiday destination; however it has also reinvented itself to become an area of choice for various types of investors.

The area has enjoyed a long term track record of outperforming the average national growth statistics, and this is expected to continue due to the demographics of the people living in the immediate areas as well as the many families who are still relocating here.

Adding to other established developments, many new developments have been launched in recent times including Montcalm in Zululami, Elaleni, Zululami, Seaton Club and Springvale Country Estate all of which are contributing to the luxury of choice when it comes to secure gated environments with great communal facilities.

This type of development has also been driven by buyer preferences and the live poll from this discussion once again showed the most desirable investments being estates at 66%.

There are however several additional new developments in the pipeline one of which is Odyssey Ballito – a ground breaking mixed use precinct encompassing medical, residential, retail and commercial space which is set to add a new dimension to the local property and investment landscape.

Interest rates are currently at a historical low and this is a major driver of investment. Siphamandla Mkhwanazi stated that the banks have seen an increase in bond applications from many potential buyers and all indications are that this is a positive time for investment.

You can view the original article here: https://businesstech.co.za/news/property/409923/

Credit Original Article to Businesstech

It may now be cheaper to buy than to rent, which is good news for first-time buyers who generally struggle to gain a foothold in the property market because of challenges around affordability, says BetterBond.

“For thousands of South Africans, owning their own home has always seemed like a pipe dream. In fact, the cost of property, particularly in urban areas, is often prohibitively expensive for first-time buyers,” the group said.

However, with the onset of the Covid-19 pandemic and the shifting market conditions, things look very different now.

The four interest rate cuts this year, which brought the prime interest rate down from 9.75% to 7.25%, sets the interest rate at the lowest it’s been in over 50 years.

Since the cost of borrowing is significantly influenced by the interest rate, this record-low interest rate alone means a bond is now more affordable for many aspiring homeowners, the group said.

“The viability of buying property in the current market is best understood when one considers that the average monthly rental in the formal market is around R7,800,” BetterBond said.

The cost of a bond on both a property purchase priced at R875,000 – currently the average bond size of the first-time buyer – and R1 million, is at R6,900 and R7,900, respectively, based on a rate of 7.25% over 20 years.

“What this highlights is that the monthly bond repayment on the cheaper property is less than the average rental amount, while the bond on the slightly bigger bond is almost on par,” the group said.

	Bond A	Bond B
Bond amount	R875 000	R1 000 000
Monthly repayment at 7.25% over 20 years	R6 900	R7 900
Difference between rent (R7,800) and bond	-R900	+R100

Transfer duty, which is the tax payable by buyers and based on the value of the property, is another cost that needs to be taken into account.

Earlier this year, however, the threshold on transfer duty was raised to R1 million, which means that no tax is payable on the first R1 million. In the case of a property valued at less than R1 million transfer duty does not apply at all.

“Of course, the bond repayment is only the start of your expenses when owning property and is not the only consideration when calculating whether you have the disposable income to afford buying, or not,” the group noted.

“You also need to be able to afford rates and taxes, water and electricity, regular repairs and maintenance, and more.”

It said that, no matter the macro market conditions, affordability remains key.

“The general guideline, set by banks, is that your monthly home loan repayment should be around 30% of your gross monthly income, before tax and expenses. To this end an affordability calculator is a useful tool to determine what the monthly repayments on a loan will be, taking monthly expenses, the prevailing interest rate, and the repayment term into consideration.

“Now, more than ever, do your calculations and make every effort to Invest in your future by becoming a home-owner rather than paying off someone else’s bond,” it said. You can view the original article here: https://businesstech.co.za/news/property/411169

Like most real estate sectors, the rental market has been deeply affected by Covid-19 and landlords around the country have had to adapt quickly in order to make the most of a difficult situation.