select
|

Buying a home should be a top financial priority for South Africans

Middle class South Africans, says Mike van Alphen, National Manager for the Rawson Property Group’s bond origination division, Rawson Finance, were once known for the conservative lifestyles and their ability to ‘make do’ during harsh times.

“Thirty to forty years ago,” he said, “excessive debt was seen by most people as a disgrace, proof that the person involved had a superficial, irresponsible attitude to life. Nowadays, by contrast, many people, especially young people, regard high debt levels as the norm – and this makes it very difficult for them to become homeowners because banks giving mortgage bonds are wary of those with high levels of debt.”

In a recent talk to Rawson Property Group franchisees, van Alphen gave examples of the reasons why mortgage bonds applications are so often declined by the banks. The most common reasons were: (1) retail, credit card, vehicle and hire purchase accounts falling into arrears, (2) debts not declared to the bank, (3) adverse court judgments not revealed and (4) in certain cases aiming for too expensive a home in relation to the applicant’s income.

In seven cases out of ten, said van Alphen, the applicant was, on paper, in a position to qualify for a bond. His income was sufficient and his job record satisfactory. However, he had somewhere along the line defaulted on credit payments and often had forgotten or was not even aware of this – and the sad truth is that, again in seven cases out of ten, the credit impairments had usually been occurred for some non-essential item or luxury that either need not have been bought or could have been bought less expensively.

In one typical case, said Alphen, an applicant was rejected because he had fallen behind on monthly payments of R12,000 incurred for buying vehicles for both himself and his wife. Both vehicles were new.

“The fact that this applicant might have bought less expensive, say second-hand cars, had never even occurred to him,” said van Alphen.

At Rawson Finance, he added, it is part of the fundamental philosophy to popularize the idea of making a home the top priority expenditure and, in addition, to encourage paying it off ahead of the stipulated date by raising the monthly repayment charges by 10 to 15% above the agreed amount.

“It has to be stressed,” said van Alphen, “that by paying off a bond at a rate higher than that stipulated by the lender, the borrower is in effect making a tax-free saving of anything from 8,5 to 10,5%, which, it has to be pointed out, compares exceptionally favourably with the usual fixed deposit account of 5% taxable interest.”

As a result of the ongoing difficult economic times, said van Alphen, many South Africans are changing their attitudes and are learning to become more saving conscious. However, he said, there are still a very large number who, regrettably, are reconciling themselves to becoming tenants in perpetuity.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
    • 21 Nov 2017
      As more and more South Africans look to invest in property abroad, Spain is offering them one of the best deals in global real estate.
    • 20 Nov 2017
      Since 2012, sectional title complexes have been leading the South African property market, not only in terms of price growth, but sales volumes as well. Remaining relatively strong, even in the face of 2017’s political and economic turmoil, experts say this market segment could offer valuable insight into South Africans’ property purchase priorities.
    • 20 Nov 2017
      Regardless of whether you are purchasing your first start-up home, downsizing or moving in with roommates, finding ways to maximise small spaces can be a big advantage, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK