Your Home-Ownership Journey Presented by. My Bond Fitness &

Transcription

1 Yur Hme-Ownership Jurney Presented by My Bnd Fitness &

2 Intrductin & Benefits f Hmewnership 2 Intrductin 2 Advantages f Hmewnership 2 Three Fundatins t Yur Jurney 4 Intrductin 4 Yur Credit Prfile 4 Affrdability & Yur Budget 6 Getting Started 6 Imprving Yur Affrdability 8 Intrductin 8 Practical Tips 8 Managing Debt 9 Escaping the Debt Trap 10 FLISP Subsidy 11 Finding Yur Hme and Way frward 12 Steps t take befre buying 12 Gal Based Actins! 14 Additinal Inf 15 Websites 15 Budget Template 15

3 INTRODUCTION & BENEFITS OF HOMEOWNERSHIP Intrductin Purchasing a hme will mst likely be the biggest investment decisin yu make and ne which cmes with specific financial bligatins. This dcument cvers a number f key areas including, the benefits f hmewnership, preparing financially and hw best t select yur hme. The curse cnsists f 4 mdules and shuld take abut 45 minutes t cmplete. But befre we cntinue, I wuld like t prvide yu with a few tips which may make things a little easier. Advantages f Hmewnership When yu appreciate the benefits f Hme Ownership, yu will n lnger see bligatins such as repaying yur lan r maintaining yur hme as a burden, but as a rute t investing in yur and yur family s future! There are many Benefits t hmewnership: 1) In the medium t lng term, csts related t hmewnership will be lwer than that f a rental unit; 2) Yur hme s value will in mst instances grw ver time; and 3) It prvides independence and cmfrt fr yu and yur family. Let start by cmparing the mnthly payments related t tw identical hmes bth in the same area. One a rental prperty, the ther a hme purchased with a lan. Yu wuld mst likely be aware that if yu rent a prperty, the mnthly rental will, as shwn by the red line n the graph belw, increase every year. The increases will ften be in line with inflatin fr that perid. The Hme Lan instalment, as illustrated with the grey Line, will in the beginning be mre than a rental payment and, will every nw and again, increase r decrease as interest rates g up and dwn. Yu will hwever ntice, that in the medium t lng term yu will generally be paying far less per mnth shuld yu purchase a hme and nt rent. Page 2

4 Anther key financial benefit f wning yur wn hme is that prperty prices have n average shwn an increase in the medium t lng term and the market value, This example belw shws a typical increase in a hme s market value ver time. The lan balance will n the ther hand decrease every year as regular payments are made until it reaches zer at the end f the lan term. The difference between the Market Value and the Outstanding Lan Balance is called Hme Equity Value. Shuld a hmewner, at any time, decide t sell his r her hme they will be entitled t keep the difference between the Market Value and the Outstanding Lan Balance. Please hwever nte, yu will nrmally have t pay sales cmmissin frm this amunt. Even if yu are nt planning t sell, Lenders will mre easily grant yu a lan if yu have Hme Equity Value. This culd mean that yu can take ut an additinal lan t fund yur children s educatin, r fund ther expenditure such as start-up csts fr a small business. What abut ther benefits? Owning yur wn hme will give yu the freedm t decrate and repaint yur hme in a style that suits yu. Every rand that yu spend n imprvements benefits yu as it imprves the value f yur investment Perhaps yu are ready t settle dwn in yur cmmunity, and want the feeling f permanence and invlvement that cmes with wning yur wn hme. A hme f yur wn als prvides a place f cmfrt fr yu and yur family and gives yu the flexibility t adapt yur living space t yur individual tastes and needs. Nw that yu understand the significant benefits f hmewnership, yu will see that getting financially fit is nt a burden, but rather the first step t financial well-being and peace f mind. Page 3

5 Three Fundatins t Yur Jurney Intrductin Yur jurney t hme wnership shuld ideally start by: Understanding yur credit prfile; Knwing hw much yu can affrd; and Getting yur dcumentatin in rder. Yur Credit Prfile As yu may be aware, a higher credit scre will in many cases result in banks and ther hme lan cmpanies ffering yu a lwer interest rate n yur lan. This culd mean that yu can affrd a larger huse r have mre cash fr thse new hmewnership expenses! In additin cnsider this: calculatins shw that if yu are ffered an interest rate f 2% abve a typical lending rate, yur repayment ver 20 years can cst yu an extra 32%. That is why we advise that when applying fr finance, yu always apprach the financier armed with an applicatin that includes a credit reprt with a gd scre. D yu knw what yur credit scre is, which factrs have an impact n yur credit scre and, perhaps mst imprtantly, hw t imprve yur credit rating? Yur credit scre is calculated by Credit Bureaus wh cllect and assess accunt infrmatin received frm yur creditrs and als lk at yur financial behaviur! S what d Credit Bureaus factr in when calculating yur scre? 35% f yur credit scre depends n yur payment histry. A gd track recrd f regular n-time payments will imprve yur credit scre. Missing payments r wrse still nly making payments 30 days after the due date, will lwer yur scre. Here they are lking fr a histry f gd behaviur in terms f making payments. The next 30% f yur scre depends n yur Outstanding Debt Percentage. T explain let s use an example where a brrwer has different lans and ten thusand rand. credit facilities, and where the riginal utstanding lan balances ttalled After a few years, the brrwer has managed t bring the utstanding balances dwn t three thusand five hundred rand r 35% f the riginal R lan amunt. Lwering yur Outstanding Debt Percentage by a large amunt, will imprve yur Credit Scre, Failing t d s may decrease yur credit scre and that means a higher interest rate and/r qualifying fr a smaller bnd. OK n t the third factr. 15% f yur credit scre depends n the age f yur credit accunts. The lnger the perid yu have had credit, the better yur scre will be. Page 4

6 Factr fur. 10% f yur credit scre depends n just hw many new lans, r enquiries fr new lans, yu are making ver a certain perid! If ver, let s say a few mnths, yu take ut quite a few lans and/r regularly enquire abut btaining lans, yur credit scre will decrease. This is because t Credit bureaus, it lks like yu are cnstantly shpping arund fr credit applicatins and rely n debt t survive. The last 10% depends n the types f lans yu have. Typically Hme lans r vehicle lans will have a better impact n yur credit scre than say credit card debt r shrt term revlving lans. What mst peple want t knw is hw can I mst easily imprve my credit scre? Well if yu cnsider that 65% f yur scre is influenced by just tw factrs, namely Payment Histry and Outstanding debt Percentage, the message becmes clear. One, pay yur accunts regularly - and n time and tw have a disciplined apprach t bring dwn yur existing lan balances as quickly as pssible yep like that! But here s the catch, withut taking ut new debt! A gd tip is t put debit rders in place and ensure yur payments g ff in gd time. Yu may view yur free credit prfile by linking t ur service prviders My Bnd Fitness prgramme and get an indicatin f yur Credit Prfile status. Easy t read dashbard screens will assist yu in understanding yur credit scre. Page 5

7 Affrdability & Yur Budget When yu apply fr a bnd, financial institutins will cnsider bth yur credit histry as well as yur affrdability. Drawing up an accurate mnthly husehld budget will assist in determining what yu can affrd and where yu culd pssibly adjust yur budget t imprve yur affrdability. Unlike what yu might believe, budgeting isn t all abut restricting what yu spend mney n r cutting ut all the fun in yur life. It s really abut setting and meeting yur financial gals by understanding hw much mney yu have, where it nrmally ges, and then planning n hw t best allcate thse funds t reach yur gals. Yur gals culd include saving fr a dwn-payment n a car, getting ut f debt, saving fr retirement, putting yur kids thrugh cllege, r traveling. Withut gals, yur budget will just be a pair f handcuffs. Nw, list yur incme and using yur last 3 mnths banks statements and even till slips, recrd all yur mnthly expenditure. Cash spending is the biggest leak in mst budgets. Cash disappears quickly and if yu dn t write dwn everything yu spend it n, yur budget will nt help yu much. Identify gd r bad spending patterns that yu may nt have been aware f when yu weren t tracking yur spending. When it cmes t wrking ut yur budget each mnth, yu need t distinguish between thse items yu really NEED and the items yu WANT t have and then have the discipline t stick t the items and amunts listed in yur budget. Getting Started The My Bnd Fitness nline applicatin can help yu understand yur credit prfile as well as assist yu t cmpile an accurate budget based n yur last three mnth s expenditure. This is an excellent base frm which t start. If yu have prepared yur persnal budget f incme and expenses, yu can cmpare yur wn budget with the My Bnd Fitness budget as it will have an autmated summary f yur persnal banking transactins ver the past 3 mnths. This will be a gd reality check fr yu. As nted earlier we will send yu an SMS r invitatin fr the My Bnd Fitness web link. Nte that registratin is free. Page 6

8 Once yu re lgged in, yu can learn mre abut yur credit prfile and affrdability, r start preparing t buy yur hme in 3 easy steps. Step ne wuld be t knw yur credit prfile. Step tw wuld be t assess yur affrdability using an easy and quick and nline prcess If yu are ready t buy, the third and final step wuld be t uplad key dcuments t yur persnal My Bnd Fitness prfile t ptentially speed up the Hme Buying prcess. These will include yur: Pay-slip; Identity dcument; Prf f address; and Sale Agreement [nce yu ve signed it] If yu cmpleted the first tw steps we wuld already have yur: Credit reprt; Affrdability analysis; Bank statements; and Budget ver the last 3 mnths in place Page 7

9 IMPROVING YOUR AFFORDABILITY Intrductin In this mdule, we wuld like t highlight three specific areas that can imprve yur affrdability. These are: Saving n cmmn everyday expenses; Reducing Shrt Term Debt; and Applying fr a FLISP husing subsidy fr first time hmer buyers, shuld yu qualify. Practical Tips Here are sme pinters t help. Pack yur wn lunch. Less takeaways can save yu a fair amunt per mnth! If yu are traveling alne t wrk, jin a lift club. Sure, yu are frced t leave and return frm wrk at specific times, but is cnvenience r saving the pririty right nw? Apply the thirty-day rule! When yu think yu need an expensive item, wait 30 days and then ask, D I really need it?" Yu might find that yu really dn't! Restaurants can be great, but why nt rather invite friends rund and eat at hme! When yur friends apply the same apprach, eating ut will be mre scial and much cheaper. Ok! While we are n the eating tpic, cnsider cking duble r triple prtins when yu have time and freeze the extra prtins. This way yu avid expensive takeaways fr thse evenings when yu are running late r when yu "simply d nt feel like cking". The Gym Membership! Where's the Gym again? Yes fr many f us we pay, but we dn't really play. Cnsider cancelling r nt renewing yur membership and rather exercise by walking r running. Pay cash fr medical bills at yur dctr r dentist. They will generally give yu a cash discunt. Sure, yu will have t submit the accunt yurself, but yur medical aid cver will n dubt stretch fr lnger, and the savings will keep n ticking up. The cell-phne can talk away yur incme quite efficiently as that mnthly debit rder rcks yur bank accunt. Cnsider ging t prepaid. The per-minute rate might be a bit higher but yu kind-f think twice whether yu need t make that call r send a WhatsApp instead. Page 8

10 With vehicle insurance, insurance cmpanies will always nly pay ut the market value f yur car. Yur car's value decreases every year. Cntact yur insurance brker and reduce the amunt f cver t match yur cars value. Managing Debt Keeping track f the mney yu spend each mnth n items yu need, will help yu manage yur finances but mre critically it will eliminate the need fr cstly credit. Try ur free mbile budgeting tl t track yur spending g t t register. Yu will them simply create yur budget, capture expenses n the g and then check n a regular basis if yu are living within r beynd yur budget! Registratin is free and the csts are 0.20 c per expense capture. Any type f phne can use this budgeting tl and after using it fr a few mnths, yu will mst likely agree that this is easiest way t keep track f budget spending and the mst affrdable bk keeping system fr yur wn budget. Yu can even lad the budget and mbile number f yur partner s that yu can bth keep track f yur ttal husehld budget expense. Cmpare yur Mbile2budget each mnth with yur actual spending and then adjust yur mbile2budget t make sure that yu are always n tp f yur budget. While credit can be used respnsibly, using credit cards r shrt-term lans t purchase nn-essential items, is ften cstly in the lng run. But hw can careless use f credit can impact yu and yur family? Yu wuld nrmally buy grceries and ther essential items every mnth. These wuld typically be cash purchases. But why nt buy that Flat Screen TV? Everyne seems t have ne, and yu are tld yu can pay it ff ver 12 mnths if yu purchase it n credit. Out cmes the credit card and yu are nw enjying yur TV-prgrammes in full HD. Alng cmes mnth tw. Yu still have enugh cash fr mst f yur grceries but yu buy a little less, as yu make that first instalment t pay ff yur new TV. Yu are f curse, als paying the interest n the utstanding balance, and h yes, dn t frget the mnthly admin fee. Well that wasn t s bad yu say. Maybe I shuld get that PVR decder. Then I can recrd all my prgrammes and watch them when I want t. yu say. The credit card cmes ut again and yu are the prud wner f a PVR Decder. Page 9

11 Mnth 3 arrives, and the fridge is lking a little empty. Yu buy yur grceries but realize yu have t buy far less. Yu nw have t pay the instalment fr the TV, the PVR decder and the interest and admin payments fr bth. Maybe I can buy sme grceries n credit yu say. Yu get the picture! Purchasing items n credit can be risky and ver time yu will have less and less mney available fr the items and services, yu and yur family really need. Escaping the Debt Trap This simple apprach can help yu. Cllect details f all yur shrt term debt accunts. List these debts n a page r spreadsheet, frm the smallest utstanding balance t the largest. Keep n paying the nrmal mnthly payments required fr every accunt each mnth. Then use spare cash identified in yur budget t pay extra n the smallest debt each mnth. Keep n ding this until it is paid ff. We ll call this ur Debt Busting Payment! With that debt paid ff, add what yu were nrmally paying ff n the smallest debt nt yur Debt Busting Payment and start paying ff the next smallest debt. Yu get the idea. Each time yu pay ff a debt, yu add the nrmal mnthly payment t increase the size f yur debt busting payment. Ding this will als save yu interest, admin fees and credit insurance, but mst imprtantly, yu will mre easily affrd that dream hme. Page 10

12 FLISP Subsidy Anther way t imprve yur affrdability is t apply fr a FLISP subsidy. FLISP stands fr Finance Linked Individual Subsidy Prgramme. This is a Gvernment subsidy that assists qualifying husehlds by prviding a nce-ff subsidy between the ranges nw shwn n screen. The criteria t qualify fr FLISP are basically as fllws. It is targeted t husehlds: Whse mnthly husehld incme ranges between the amunts nw reflected n screen; Wh are purchasing a prperty fr the first time; Wh have secured bnd finance; Wh have a dependent spuse r child Wh are Suth African and/r hld a permanent residency permit; and We can help yu apply fr a FLISP subsidy, shuld yu wish t purchase a hme. Once yur bnd is already apprved and yu meet the qualifying criteria g t t apply. Page 11

13 FINDING YOUR HOME AND WAY FORWARD Steps t take befre buying What steps and actins d yu have t take befre wning a hme? Cnsider the fllwing: Have a depsit Ptential buyers shuld start saving fr a depsit befre huse hunting. The greater the percentage f the deal that the buyer finances themselves, the better the chances f getting bnd apprval and a gd interest rate. Remember that a FLISP subsidy can als be used as a depsit. Make sure yur debt is under cntrl A better credit scre will in many cases result in the lender ffering yu a lwer interest rate n yur lan. This culd mean yu can affrd a larger huse r have mre cash fr thse new hmewnership expenses! G ahead and get yur free credit check with the My Bnd Fitness applicatin. Start small and build up Yur first hme may nt be yur dream hme, but it s a ft in the dr and yu can always build n r mve t a bigger hme later. Remember affrding yur hme lan repayment is critical. Lk at yur budget again and make sure yu have enugh mney in yur budget fr. The lan repayment; Administratin Fee Life Insurance; Hme Owners Insurance; Rates & Taxes linked t the prperty; Water & Electricity Csts; and If a Sectinal Title Prperty, Levies The lender shuld be able t give yu a fairly accurate estimate f the items listed under the bank image n screen. Ask the agent r prperty develper t give yu an accurate estimate f the ther items. Remember that yu can get an accurate estimate f yur affrdability if yu use the nline service: Page 12

14 Be prepared fr the unexpected Prepare financially fr pssible future scenaris such as an interest rate increase r any ther unplanned csts. If yu are buying a prperty find ut if the csts f the transferring attrneys and bnd registratin will be included in the purchase price this will usually be the situatin when yu buy in a large prperty develpment. If nt wrk ut hw much these csts will be s that yu can have extra cash available t cver them, as the transfer f the prperty nt yur name, and the bnd registratin will nt happen if the legal fees are nt paid. T wrk ut the legal csts and charges g t the free website Als, factr in the raising fee f a bank t apprve yur bnd. If yu have t relcate als factr in the csts f the remval f yur furniture. Visit the Area Yu must ideally knw the general area yu want t buy in and nt just lk at the huse that yu might want t buy. Getting a feel fr the general area and actual selling prices is critical! Ask any qualified agent wh knws the lcal prperty market fr assistance in getting these details. Inspect the Prperty N matter hw much yu like the hme r whether ther buyers are als interested, make sure t take yur time when viewing the prperty. Call in a prfessinal hme inspectr if yu have any dubts r questins. It is very easy t miss things when excited abut a pssible purchase. This culd mean expensive repairs later n. Deed f Sale Make sure that yu shw the deed f sale smetimes called an Offer t Purchase, first t a cnveyancing attrney [a prperty specialist] wh can help yu t prtect yur rights befre yu buy. The cnveyancer will identify shrtcmings in the sale agreement and give yu advice as hw it may be rectified. Page 13

15 Check yur Financial Fitness When yu are ready t buy first have a lk at yur prfile n and check: (1) whether yur credit rating up t scratch t negtiate the best hme lan deal? (2) Is yur affrdability in line with the prperty that yu want t buy? Be ready in the starting blcks fr yur hme lan applicatin nce yu have cmpleted yur prfile Africanbank.mybndfitness.c.za and upladed yur imprtant dcuments like yur latest prf f address (nt lder than 3 mnths), yur latest pay-slip and identity dcument] yu will be able be able t submit yur hme lan super fast withut the need t cmplete any lengthy hme lan applicatin frms Yur up-frnt preparatin will make it easy t buy a hme and apply fr a finance! Gal Based Actins! Get Mtivated! With gals set, a basic budget in hand, a debt busting payment plan, and a whle lt f infrmatin, yur gals shuld be within reach. Remember, despite all f this it is nt easy t change ne s behaviur. Yur changed attitude t managing yur mney needs t be supprted by a disciplined apprach. Keep n using the mbile2budget tl, even after yu have becme a hme wner as it will be vital t adjust yur new budget t accmmdate the new hme lan and expenses assciated with wning a hme. Remember that Discipline is the bridge between writing dwn ur gals and achieving ur gals. I wuld like t cnclude with this ld African Prverb. If yu want t travel fast, g alne if yu want t travel far, g tgether. We hpe that yu will travel tgether with the advice f experienced travellers. S keep yur gals in sight, remain disciplined and prsper. Page 14

16 ADDITIONAL INFO Websites Online credit & affrdability check Guides yu thrugh the full prcess f successfully getting applying fr hme finance. Mbile app t manage yur mnthly budget and expenditure Subsidy fr First Time Buyers Guides yu applying fr subsidy finance shuld yu qualify. Avidfirefly.c.za Assists in calculating bnd and registratin csts. MEYER DE WAAL - MY BOND FITNESS Mbile Office nd Flr, Blck C, The Bulevard Office Park Searle Street, Wdstck, Cape Twn Page 15

17 Budget Template BUDGET FORM INCOME MY INFORMATION MY SPOUSES INFORMATION Basic Salary Overtime pay Allwances Other incme Other TOTAL INCOME PAYSLIP DEDUCTIONS MY INFORMATION MY SPOUSES INFORMATION Pensin Medical aid UIF Insurance TOTAL DEDUCTIONS HOUSING EXPENSES MY INFORMATION MY SPOUSES INFORMATION Rent / Hme Lan Rates / Municipal Services Electricity Water Security Hme Telephne Cell Phne Furniture and Appliances (Cash purchases) Gardener / Husekeeper TOTAL FAMILY EXPENSES MY INFORMATION MY SPOUSES INFORMATION Schl fees Nursery / Crèche Fees Schl csts (bks, travel) Allwances fr children Fd Daily e.g. lunches Fd / Grceries Mnthly Pets Clthing (cash purchases) TOTAL P.T.O

18 TRAVEL EXPENSES Public transprt Lift Club Vehicle instalment Petrl Vehicle Maintenance TOTAL MY INFORMATION MY SPOUSES INFORMATION ENTERTAINMENT EXPENSES MNet / Dstv Cinema / Mvie Hire Dining Out Beer, wine, cigarettes Ltt / Casin / hrse racing Annual hliday Hbbies / subscriptins TOTAL MY INFORMATION MY SPOUSES INFORMATION INSURANCE AND SAVINGS Car and husehld insurance Life insurance Retirement funds Funeral plans Fixed depsit Stckvel Other TOTAL MY INFORMATION MY SPOUSES INFORMATION OTHER EXPENSES Bank Charges Dnatins Charities Dnatins Church / Religius Credit Card Other Credit Cmmitments (i.e. shrt term lans) TOTAL MY INFORMATION MY SPOUSES INFORMATION SUMMARY INCOME Ttal Payslip Deductins Ttal Husing Expenses Ttal Family Expenses Ttal Travel Expenses Ttal Entertainment Expenses Ttal Other Expenses MONEY LEFT OVER / MONEY SHORT MY INFORMATION MY SPOUSES INFORMATION Page 17