If you're in the market for a home or your first investment buy, this is a very exciting and big decision, probably one of the biggest decisions of your life.
Before your search begins, here are some guidelines to take in to account as you start your journey into the unknown.
First - one should know what you want. “Do your homework first” said Craig Hutchison, CEO of Engel & Völkers Southern Africa. Numerous estate agencies have open houses in various areas every weekend, and some even during the week. This will help you get of the size that suits your needs and will help give good insight into your choice of area. Think about accessibility to work, public transport, schooling and other amenities. “Remember location is of great importance, especially to secure your investment for the future, and in fact will also have an effect on your loan approval” Craig continued.
By canvasing and viewing a few homes in different areas, it will help you to know exactly what type of property you can afford. It's not only the instalment you'll be paying, you need to factor in the additional costs which comes with owning a home such as bond and transfer fees, insurance (homeowners, household and life) and municipal costs in your budget.
A home loan for first time buyers can be difficult to understand, so ask your property sales advisor for help to ensure that you are aware of the process and all associated costs. You can also contact your affiliate bank or Engel & Völkers' Financial Services division for a pre-approval, so that you know which amount you would qualify for, as this will also assist in your home search.
“One of the biggest mistakes new homeowners make, is to forget about the cash funds needed to buy a home. Only after the contract has been signed and loan approved, when you start receiving invoices from the attorneys, do you realise that you will need additional funds. This could put a damper on the excitement of owning your own property” Craig cautioned. Craig continued by re-assuring homeowners that when working with a reputable real estate agency, your sales advisor will be trained and qualified to provide you with all the information you need beforehand, avoiding such situations.
Depending on your financial situation, some of the home loan products out there allow you to qualify for a larger loan, eliminating the cost of paying a deposit, but others require the security of investing by having an upfront amount. Refer to your latest edition of the National Guide to Real Estate for a comprehensive guide to the current LTV's (Loan to values) of each financial institution. Also be aware of other once-off costs that you will have to pay, over and above the deposit. These include initiation and administration fees, legal costs, bond registration fees and VAT/Transfer Duty.
Now, after being furnished with all the information, you are ready to start your elimination process and to choose the home of your dreams. There are a number of factors to consider when determining the initial amount to offer on a home. Sale price of similar houses in the neighbourhood for the past year, as well as the current market situation. This will give you a good estimate of what you can expect to pay. Your property sales advisor will assist you with this information and advise you correctly to ensure you make the right choice. The general condition of the house is also an important pricing factor. Information concerning things that need to be done in or around the building, must be taken into consideration when making an offer.
If your decision has been made, it's time to sign an offer to purchase with the seller and to complete your home loans application. “We at E&V Finance are highly trained and experienced in this part of the transaction. We can apply on your behalf with all the institutions, to secure you the best offer and interest rate” stated Sandy Reddy, Head of EV Financial Services. There is no cost to making use of this service, you simply complete one form, and we do the rest,” she concluded.
When applying for a home loan, you will need the following documents at hand:
A signed offer to purchase
Proof of income
A South African bar-coded or Smart Card identification document
Proof of current residential address (municipal account, Telkom account or valid TV licence)
Salary earners: Most recent salary slip
Bank statements of the last 6 months
Once you have all your documentation, the approval process begins, and you will receive a AIP (approval in principal), this usually takes 5 – 7 working days. Although the bank might have granted you an AIP, they will still need to arrange an appointment with the seller in order to go out and do a full valuation of the property being purchased. This ensures that your investment is sound and that your home choice is at market value.
Once approved, the bank instructs the bond attorney and transferring attorneys so that they can start the second part the administration process. Herewith a summary of the process which your new home will undergo before it is officially transferred to your name:
- Title deeds and cancellation figures are requested from the bank currently holding the bond.
- A rate clearance certificate is requested from the local authorities and municipality.
- The bond attorney contacts the transferring attorney and advises the amount available for guarantees. They then request the draft transfer deed and guarantee requirements. The cancellation attorney is requested to cancel the seller's bond on receipt of a guarantee for the outstanding amount.
- Once the transfer attorney has received the title deed and cancellation figures, the buyer and the seller sign the transfer documents.
- The buyer pays the transfers costs to the transferring attorney.
- The bond attorney prepares the bond documents which the buyer signs together with paying of the fees.
- The bond attorney lodges the documents at the deeds office.
- The deeds office receives the documentation and checks it before being registered.
This process can take up to three months, sometimes longer, from the date of approval to transfer, depending on each municipality. Before the home loan is officially granted, your financial position and credit record will be checked again, and the bank will pay out the loan on the day of registration. Once the legal documents are signed, the transfer fees paid and the sellers receives his/her money, the deed is done. You can then bring out the champagne to congratulate yourself for being a proud owner of your new home.
Responsibilities do not end there as it is very important to keep a good credit record for any future bond applications or loans, and you have to make your bond payments on time. It is vital that you do not miss a single monthly repayment, as the interest owing on the loan will increase and you'll end up paying more than necessary. Debit orders are a good way of preventing late payments. If you have trouble making payments, inform the bank as soon as possible. One could always try boosting your monthly installments, to benefit from great savings on interest and pay off your home loan as quick as possible.
Remember that property has always, and still remains your best investment, and the benefits of owning a home are well worth the effort. Although this might seem like a lengthy and complicated process, your real estate agent is there to assist you with each step. “Our property sales advisors are trained on international standards and are there to elevate the stress out of home buying for you, by taking care of most the items above. They will prompt you with what is needed when, as well as keep you updated regarding the process and where it stands” Craig concluded.