Home Loan In The Making
By Vanessa Papas
With money to burn some celebs have pulled out all the stops in choosing the mansion of their dreams. These pricey pads definitely give new meaning to the term ‘dream home’. Kylie Jenner owns a R32-million mansion down the block from her older sisters. Lady Gaga’s home is valued at R307-million and includes a bat cave, while Leonardo DiCaprio bought his pad for R69-million.
Meanwhile, Mumbai, India, is home to the world’s first R15-billion home. Antilla features 27 floors and takes its name from the mythical island of the same name. Built by India’s richest man, Mukesh Ambani, it even has several floating gardens, not one but three helipads and six floors dedicated to parking!
While Antilla is out of the reach of average home buyers, that’s not to say you can’t buy your dream home – despite tough economic times.
“Property is always a great investment, with almost certain returns. However, in today’s world banks become nervous about lending, which can make owning your own home seem like a pipe dream,” says Barrie Swart, head of Gumtree Property. “A recent poll conducted by Gumtree Property showed that 66.6 percent of people believe that it’s always better to own your own home, while 26.6 percent said they couldn’t afford to buy or rent and have to share with others.
Apply At The Right Time
The property market moves in cycles. If you have cash on hand, the best ti me to invest is aft er the bubble bursts and prices drop. But if you are applying for credit, it’s best to buy as a property boom starts. The downside of a boom is that house prices are skyrocketing, but if you buy at the very cusp of a property boom, banks are more likely to extend credit. Large construction prices, media optimism and good interest rates are all signs of a boom.
Improve Your Financial Standing
If possible, reduce your existing debt – start paying an extra amount into your outstanding accounts every month. The more disposable income you can free up, the better. And the more money you have put away in a savings account, the better. Aim to have at least 10 percent of the value of your intended property put away in cash.
If You Are Rejected, Find Out Why
If your application is turned down, find out why. Bonds are rejected all the time – perhaps you don’t have an adequate credit score or bad debt. Once you know, you can address the issue and reapply.
Different financial service providers have different criteria for assessing your credit-worthiness. Explore as many channels as you can – including your bank and bond originators – to find out who can extend the most credit to you, at the best rate.
Buy To Improve
YOUR dream home might not be financially accessible at this stage. Try to buy the worst house on
the best street and make improvements over time. You might not have your dream kitchen and pool right away, but you can add those features as your financial standing improves, and then flip the home for profit. Mortgages can be extremely expensive and difficult to obtain, but a little groundwork goes a long way. Don’t give up on the dream of owning too quickly – keep working on it and you too can become a home owner, no matter the state of the economy.
Good To Know
According to the latest statistics released by Better Life Home Loans, SA’s biggest mortgage originator, the national average home price has risen by almost eight percent in the year to end- June, compared with 5.9 percent in the previous 12 months. Statistics also show that the rate of home price growth is slowing, having achieved an increase of just two percent in the June quarter, compared with an increase of almost five percent in the first quarter of this year. “This shows once again the dampening effect that high cost-of-living increases have on the real estate market,” says Better Life Home Loans CEO Shaun Rademeyer. “Most consumers are struggling to make ends meet, and while the demand for property remains high, the decline in discretionary incomes is increasingly limiting what potential buyers are able to afford – and what banks are prepared to lend them. Banks are, however, still favouring secured lending products such as home loans and the percentage of home loan applications being declined outright has dropped to 27 percent in the past year from 28 percent in the previous 12 months. Consumers, in turn, are placing larger deposits on their home purchases, possibly due to the favourable interest rates they receive when doing so, with statistics showing that 52 percent of all prospective buyers are putting down more than 10 percent of the purchase price, with the current average being 21 percent of the purchase price.”