An increasing number of homeowners who have lived in large family homes for 15 or 20 years are now selling and moving to smaller properties.
Some have reached retirement age and want to move to lower maintenance homes in secure villages, some want to downscale in order to reduce their home-ownership costs and save money, and some are “empty-nesters” who would prefer a new lock-up-and-go home so they can travel more or pursue a new career.
At the same time, notes Carl Coetzee, CEO of SA’s foremost home loan originator BetterBond, many young homeowners are getting ready to “move up” from apartments and townhouses to bigger properties in order to accommodate growing families or their ageing parents.
“But whatever their reason for moving, the majority of these repeat buyers will need a new home loan in order to put their plans into action – and most will find that the application process has changed considerably since they last went through it, especially if that was more than 10 years ago.”
For example, he says, they should be prepared for their overall debt situation, income and monthly expenditure to come under much closer scrutiny now than it did previously, thanks to the National Credit Act. “Although the banks are eager to lend to home buyers at the moment, this legislation requires them to ensure that any new credit application they approve will not result in the consumer becoming over-indebted, and they take this very seriously.
“In addition, repeat buyers really should engage the services of an expert originator such as BetterBond now if they want to streamline the process, significantly increase their chances of approval and ensure that they get the best available interest rate – all at no additional cost to themselves.
“With us, buyers only need to complete one application that we then motivate and submit to several banks simultaneously, including the buyer’s own bank. This encourages the lenders to reply quickly – often within hours - and also ensures that they immediately make their best offers as regards the interest rate to be charged.
“There is thus no longer any need for the buyer to go from bank to bank with their home loan paperwork and then endure a long wait for replies or the stress of trying to negotiate rates themselves.”
Currently, says Coetzee, the average difference between the highest and lowest interest rates offered on a single loan application is 0,5% - and more prospective buyers need to be aware of what a difference this can make over the lifetime of their home loan. “On a R1,5m loan, for example, a rate concession of 0,5% translates into total savings of about R6 000 a year on your instalments, and more than R118 000 on the cumulative cost of the property over 20 years.”
What is more, he notes, while the National Credit Regulator says that the average rate of credit application approvals in SA is currently only around 40%, BetterBond’s rate of approval for the applications it submits is consistently over 75% - giving prospective buyers a far greater chance of obtaining a home loan than if they apply directly to the banks themselves.”
However, things are not completely out of their hands. In order to make sure that the application process runs as smoothly and quickly as possible, repeat buyers should be prepared to provide their originator with the following:
* Personal details such as their full names, ID number, tax number, date of birth, phone numbers, marital status, number of dependents, level of education, current address and length of stay there. These details should all be supported with hard copies of the relevant documents, such as an ID book, marriage certificate, school and university qualifications, most recent tax return and a council account that verifies their address.
* Employment details such as the name, address and phone number of their current employer and similar information about any other employers in the past two to five years. They will also need to state what position they hold and the type of work they do. This information should similarly be supported with documents such as an appointment letter and a formal job description, as well as copies of any specialised qualifications earned while in their current position,
* Income details such as their gross and net household earnings, supported by three months’ worth of payslips and bank statements. Regular overtime payments and any bonuses, commissions, dividends, interest and rental income may also be counted as income provided that it is fully documented, and single parents may also include court-ordered alimony or child support payments.
* Monthly expenditure details, including all instalments on existing debts, other regular payments such as school fees, insurance premiums, cell phone costs and water and electricity bills, and their average monthly grocery, transport and entertainment costs. Lenders use all this information to work out how much discretionary income potential borrowers have and whether they will comfortably be able to afford the repayments on a new loan and applicants do need to make very sure that they don’t leave anything out, especially when it comes to easily-overlooked debts like store card balances and old student loans.
Coetzee says additional documents that could be required include a copy of any offer to purchase that has already been made, a copy of the property title deed if available, and a copy of the building contract if the home loan applicant is intending to buy a plot-and-plan home. Applicants whose existing homes have already been sold should also provide copies of all the documents relating to that sale and showing what their proceeds will be and when these are likely to become available.
And finally, prospective borrowers should be prepared to provide details of any other assets they own, such as savings, shares, holiday homes, rental properties and life insurance policies, although these may not always be required.