|Buying a property is one of the most daunting experiences you will ever go through.
It does not matter if you are a first time home buyer – or it is your second or 3rd property.
We deal with property transactions every day and that is why we decided to change the way property transactions are done.
DO YOUR HOMEWORK BEFORE YOU BUY GET AN ACCURATE ESTIMATE OF THE HOME LOAN YOU OUGHT TO QUALIFY FOR – IT TAKES YOU LESS THAN 5 MINUTES
DO YOU QUALIFY FOR A GOVERNMENT SUBSIDY AS FIRST TIME HOME BUYER?
GET THE BEST LEGAL TEAM BEHIND YOU – LET US CHECK OUT YOUR DEED OF SALE – BEFORE YOU SIGN IT [AVAILABLE FREE TO ALL EXISTING CLIENTS]
|Rent to buy feature in BusinessDay Homefront publication.
The Rent2buy concept developed and fine-tuned by Meyer de Waal was recently featured in the BusinessDay Home Front publication. Strict lending criteria, as a result of increases in interest rates has led that the Rent2buy concept has proved to a solution for many to get their foot in the door to own their own home. A proud example is one of our latest home owners. He had a judgement against his name a year ago, the judgement was paid up, we secured a Rent2buy transaction for him when no bank wanted to give him a home loan and 9 months later his credit profile improved so well that he was granted a home loan. He took transfer in February 2016 and now a proud home owner. CLICK HERE to read the full BusinessDay article…
Dispute Resolutions Course
CAPE TOWN – In this advice column Tshireletso Rakgori from Alexander Forbes answers a question from a reader who wants to know if he should put down a deposit on an investment property he is buying or rather invest the capital elsewhere?
Q: I have R100 000 in my savings account. I’m currently buying an investment property and would like to use the money for deposit to get the monthly payments down. The banks offered me a 0.05% improvement if I make that deposit and the monthly repayments will then match the rental income.
My fiancé thinks I should rather take that money and invest it elsewhere where it can earn higher interest. What would you advise?
Paying a deposit towards a mortgage bond can make a significant difference. A mortgage is a major financial burden and reducing it can have immediate benefits.
Buying a house via a mortgage bond essentially entails making two kinds of payments. The first is to repay the capital amount, which is usually the purchase price of the house, and the second is to repay the interest that the bank charges over the period of the loan. During the first years of the mortgage bond, the largest part of your repayments goes towards paying the interest, making the reduction in the capital amount quite small.
How this works is that the deposit you pay upfront reduces the mortgage bond you owe. Therefore a smaller bond is required, which in turn reduces the amount of interest you pay.
To make the above more clear, consider the following:
Let’s say for example the property you are purchasing is R1 200 000. If you take out a bond with no deposit at a 10.25% interest rate, you will pay R11 779.72 per month over 20 years. At the end of the bond term, you will have paid back R2 827 132.95
On the other hand, if you could put down a R100 000 deposit, the monthly repayments will be R10 798.08, and the total repayment will be R2 591 538.54. If the deposit is added to this, the total still only comes to R2 691 538.54. In other words, you would save R135 594.41.
In paying the deposit you therefore not only get the benefit of having the expected rental income match the loan repayments, but you also get to save on some of the interest that the bank would have charged over the years. The other benefit is that the mortgage will be paying itself essentially from your rental income.
The benefit is therefore immediate and could help you to meet your cash flow needs in the short term. In the long term you would also benefit from the capital growth on the property. Being a primary human need, housing is always in demand and if you have chosen one in a good area, you should see growth in value at least linked to inflation.
Overall, property is a great investment, however if you are going to acquire it through a loan you want to do your best to minimise the loan as well as the term of the loan to save on interest. That way you can enjoy more years of earning rental income that will be coming into your pocket instead of it going towards loan repayments.
Tshireletso Rakgori is a financial planning consultant with Alexander Forbes in Johannesburg.
This article appeared in Moneweb
THE City of Johannesburg will not pin liability for historical property debt on new owners.
Instead, it will insist that a previous owner settle all outstanding debt against a particular property prior to it being transferred to the new buyer. The group finance department has hired a firm of consultants and attorneys to do this.
This move goes against a recent Supreme Court of Appeal ruling, which found that a present-day owner could be held liable for old debt incurred against a property for up to 30 years prior.
The city, insisting on its new approach, has collected R730m in historical debt against 25,033 properties.
Spokesman for the city’s group finance department Stanley Maphologela said the city would write to transferring and conveyancing attorneys to inform them of steps to be taken to demand payment of outstanding debt, and if not effected, Johannesburg will approach the courts to enforce payment.
“Where a sale of the property takes place, a demand will be made to the transferring attorneys and Sheriffs for payment of outstanding municipal debts, this in keeping with section 118 of the Systems Act,” said Mr Maphologela.
“Many of our clients, who are sometimes first-time buyers, are often caught by surprise when they face the huge debt that has accumulated under the previous owners (sellers). Now we want to ensure that we collect all the outstanding debt from the seller before the transfer of property happens as not to negatively affect the new buyer.”
Prospective buyers are now able to directly approach the city for details on the entire debt against a property.
“Furthermore, the buyer has the right to approach the city to obtain the municipal statement of the seller (property in question), on condition that they can produce a valid offer to purchase document which is signed by all parties (the seller, buyer and estate agent). The buyer also has the right to request a copy of the seller’s municipal account from the estate agent before entering into the contract.”
The move by Johannesburg is in line with efforts by the South African Local Government Association (Salga) — representing 278 municipalities — to ensure that property owners with unpaid bills in one municipality will not be able to buy property in another municipality before settling their outstanding debt.
Salga has called for the establishment of a central database of residential property owners and business owners with outstanding rates and services bills. The database will be linked to the issuing of municipal clearance certificates.
The association has further called for sellers of property to be made liable for debt owing beyond the two year prescribed period.
Every year thousands of homes are traded between buyers and sellers without any guarantee that these properties are free of defects.
“Home warranties protect all parties involved in the property sale against any financial and legal comebacks related to defects,” says Dobrescu.
This is according to Lee-Ann Dobrescu, Head of Group Business Development at Hollard, who says the defect could be a hidden flaw or weakness that a seller might or might not know about, but the buyer cannot discover through reasonable inspection.
Dobrescu says such defects can cost a fortune to fix, not to mention an expensive and frustrating legal process if there’s any doubt that the seller did not fully disclose known defects.
A home warranty addresses these challenges, providing the buyer with the peace of mind and security that comes with a professional property inspection, coupled to an insurance policy that protects against the financial ramifications of any defects that may emerge in the property for two years after taking transfer.
Dobrescu says there are many benefits to having a home warranty in place.
- Peace of mind knowing that you can go into the deal with all your bases covered.
- Protects your financial interests, which are almost always stretched to the max when buying – with deposits, bond and transfer costs, municipal deposits, moving costs and so on. The last thing you need is unplanned bills to fix hidden defects.
- If you do find your dream home, albeit with a few minor problems, you won’t end up walking away from a great deal because you overestimate the extent of and cost to fix minor problems.
- A home warranty makes your property instantly more marketable to serious buyers.
- It bridges the trust deficit that exists in a property sale, speeding up the sale.
- It can mean getting a higher price for your property as the buyer knows exactly what they are getting, and you’re less likely to be negotiated down.
- You can choose to attend to any excluded or minor repairs beforehand and ensure maximum sale price for your property, or if you prefer to sell as is, you won’t overcompensate by bringing your price down further than what the cost of the repairs would be.
“Home warranties protect all parties involved in the property sale against any financial and legal comebacks related to defects,” says Dobrescu.
|It is hard to believe with all the pressure on home owners that there is still a ray of sunshine somewhere and it comes in the form of a government Flisp subsidy for first time home buyers and current new home owners.|
|SUBSIDY FOR NEW HOME OWNERS – CLAIM NOW – FUNDS ARE AVAILABLE IN THE WESTERN CAPE!!|
|We just received good news from DOH in the Western Cape – they asked us to submit as many as possible Flisp applications by the end of March as they have un-allocated funds available for existing home owners & buyers with approved home loans. They will also relax their income requirement by applying the income of the applicant at the time of bond approval and not the income as on date of the Flisp application. This initiative can be a huge boost for new home owners – considering the interest rate hikes over the past 12 months. Existing qualifying home owners who took transfer from February 2015 – to date may apply. The qualifying criteria are:
To apply and register through our website www.flisp.co.za
For more information on Flisp subsidies – from a previous media release.
Planning ahead and asking the right questions is one way to avoid serious issues when it comes to buying a home. We’ve been discussing the top tips any first time home buyer should know before taking the plunge with property expert and conveyancing property lawyer Meyer de Waal. While the first five tips were centred on finances, we wanted to get into the sort of things you might want to know once you’ve started the viewing process.
Shop ‘Till You Drop
- Once you know where you stand financially, the fun part begins. Use absolutely every means at your disposal to find the right property for you – and don’t be afraid to keep asking for more viewings. Get online with Property24, Private Property and even Gumtree to supplement any properties your estate agent might be showing you.
This isn’t an exclusive relationship! If you can find a private sale you could save yourself thousands of Rands in commission costs. Then ask your attorney to prepare an offer to purchase to present for the seller. Also, don’t be afraid to shop around for the best bond amount and interest rate. Your bank might not offer you the best deal, and there’s no harm in asking around.
Get Your Grant
Not many of us know this but there is in fact a government grant for first time home buyers. If you earn a collective household salary of between R3501 and R15000 a month you could qualify for the FLISP grant. This grant was put in place to help bridge the gap between free housing and those who need just a little help in owning their own property.
“The problem with the FLISP subsidy is so few people know about it,” Meyer explained. “We quickly realised this and wanted to help people understand what it is and how to get it. In the past few months we have managed to get our clients hundreds of thousands of Rands in payouts, including retroactive applications. If anyone is interested in the FLISP subsidy, please contact us on our website www.flisp.co.za.”
Like the FLISP grant, there are many other property related things very few of us actually know about. This is where getting yourself a property attorney or conveyancer to scrutinize every part of the purchase process could become invaluable. The “Offer to Purchase” you sign is a legally binding document, usually with penalties that you need to understand fully.
By having your own representation on your side could really save you from some nasty surprises. Do not rely on the estate agent to guide you alone – he or she may be acting only in the interest of the seller, or their own commission.
One of the most important parts of buying a home is having it inspected. Buying something “voetstoets”, or “as it stands”, is not only dangerous but could end up costing you in the long run. Don’t be afraid to insist on a full home inspection to go along with the mandatory checks. Spotting something like a structural problem, dry rot or a pest infestation before you purchase means you have the chance to request the owner takes care of any issues before the sale goes through.
There are times when getting a home loan just isn’t possible right now. Luckily there are alternatives to getting a loan through the bank. Be creative and consider options like a “Rent to Buy” or Installment sale. “We realised after the economic downturn in 2007/2008 that banks weren’t willing to lend money as freely as before,” Meyer said. “Rent2Buy is seen as “plan B”, when you cannot immediately convince a bank to approve your home loan. You can show that you are financially ready to own the property but to convince a bank you just need that extra bit of time. By entering into a Rent2Buy deal with the owner the buyer doesn’t lose out on the property,the owner earns decent interest on his investment and the estate agent still retains his commission – a win for all involved.”