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The next 12 to 24 months will be an excellent time to buy a home because there will be a wide choice of properties on the market and that will keep a lid on price increases.
However, prospective buyers who want to take advantage of this opportunity should first take the time to ensure that their finances are in really great shape, says Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s biggest bond originator.
“The reason is that when evaluating a home loan application, the banks will not only consider your income and credit record, but will also look closely at your regular monthly household expenses and your existing debt repayment commitments. And at the moment, they not only want to see that borrowers will be able to afford their monthly bond repayments, but also that they could cope with higher repayments if interest rates were to increase.”
And there is a distinct possibility that they could start increasing from later this year, he explains, as a result of SA’s investment rating recently being downgraded. “The rand is worth less now in world terms, so we can expect higher inflation, which will probably mean that the Reserve Bank has to start raising interest rates again.
“In addition, we can expect very low economic growth, which suggests more employment uncertainty and, for those who remain employed, low wage and salary increases despite rising inflation. It is thus going to become increasingly difficult for many families to make ends meet – let alone prove that they have sufficient discretionary income to afford a bigger bond repayment.”
In fact, Rademeyer says, fewer than half of those who are currently keen to become homeowners are likely to obtain a home loan without doing some serious financial preparation first. “Even if they have a steady job and an excellent credit record, they should be doing whatever they can now to slash household expenses, reduce or eliminate whatever debts they have, and create cash reserves or savings.
“Ideally, they should consult a reputable bond originator such as BetterLife Home Loans before they even start looking at properties to buy – and certainly before making any home loan application.
“Our experts know exactly what the banks require at any time, and will advise prospective borrowers – free of charge – about what they might need to do to improve their financial profile before applying for a bond, and about how a bigger deposit can protect them from the effects of interest rate increases.
“At the same time, we can suggest what price-range of homes buyers should target, so they don’t waste time looking at properties that are too expensive. Then once clients are ready to buy, we will manage and individually motivate their applications, which will improve their chances of being approved for a home loan from less than 35% currently being approved in the open market to more than 73%, which is our current approval ratio.
“In addition, we will negotiate the most favourable loan terms, because we know that even a 0,5% difference in the interest rate that borrowers are charged can make a really significant difference to the eventual cost of their property, and to their long-term financial well-being.”
For more information visit: www.betterlife.co.za