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June 22 2011

Changing The Terms Of Your Mortgage

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Many mortgage owners have been forced into renegotiating the terms of their mortgage loans as a result of the rise in interest rates during the financial crisis.  Rather than foreclose the banks were happy to negotiate a lower repayment to help these clients stay in their homes.

It also suited the banks as foreclosing could have had a serious impact on the property market and ultimately their mortgage books. According to the National Credit Regulator (NCR)  , about 30 000 homeowners are in debt counseling, and about 197 000 South Africans’ home loans are in arrears by more than 30 days.

As these  private agreements aren’t regulated by the NCR the onus is on the client to ensure that the arrangement is above board and that the lender does not unilaterally alter the terms and conditions of the loan.

Banks typically change you profile when you enter into an arrangement and suddenly you go from being a sub-prime client to a client with a much higher interest rate. Always make sure that in terms of the agreement the banks is permitted to alter you interest rate unilaterally - in many instances they aren’t and can end up overcharging you thousands of Rands on your mortgage.

The number of clients entering these arrangements is quite large , according to  Standard Bank  it enters on average 400 such agreements per month , while  FNB says it has done more than 1 000 of them and Nedbank 10 000. Absa was unable to substantiate with any figures.

Its standard practice for the banks to charge you prime while the arrangement is in force , but once the arrangement period is over they should change you back to the interest rate prior to the debt arrangement. If this doesn’t happen you should check your loan agreement , if they are acting contrary to the terms of your agreement take it up with the bank and get the interest rate changed to the agreed rate. If you don’t get any satisfaction from your bank , you can always refer the matter to the Banking Ombudsman.

Over the period of the mortgage , paying to much interest can result in tens of thousands of Rands of over payment , the onus is always on the client to ensure that you aren’t getting ripped off.

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May 12 2011

Repo Rate Remains Unchanged @ 5.5%

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Reserve Bank Governor Gill Marcus today announced that the Repo Rate will remain unchanged at 5.5%. This is good news for anybody with a mortgage loan , personal loan , car loan or credit card debt. However signs are that at some point we could see an increase in the rate.  The MPC concedes that inflation is likely to breach the upper target during the first quarter of 2012.

Governor Marcus cites cost push pressures being the primary cause for the breach making it easier not to increase rates. The Reserve Bank’s dual mandate of growth/jobs and inflation must have played a major role in keeping rates unchanged. The MPC are probably very aware of the high unemployment rate in South Africa , 25% , which is probably the highest unemployment rate in the world.

Factors that are likely to put pressure on South African inflation over the near future are the oil price and the Rand/Dollar exchange rate.  It seems that the period of rate cuts are over and the next moves in the Repo Rate will be higher. If you have a large level of debt on a variable rate , now might be a good time to consider fixing your interest rate.

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March 8 2011

Consolidating Your Debt

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What is a debt consolidation loan - in a nutshell its is a single loan that is taken out by an individual and the proceeds are used to pay off all your smaller debts. The underlying principle is that the single loan is at a lower rate of interest and you save money over the long run. It is often in the form of a mortgage loan.

Here are some basic concepts to keep in mind when consolidating your debts.

Summarise All Your Debts

This will enable you to obtain a better understanding of your financial situation. It also facilitates easier management of your debt and payments. You should only include debts like car payments , credit cards , clothing accounts and mortgage payments.

What Interest Rate?

Find out what the interest rate is on each debt that you currently have. You will be amazed at how much the various contracts vary and how much interest you are paying in some cases.

Shop Around For Consolidation Loans

A good place to compare various debt consolidation offering is to conduct some online research. Various lenders have packages that differ substantially so you need to do your homework and make sure you are comparing apples with apples.

There are also many reputable online debt consolidation offers available online. Check out the offers available at various reputable websites.

Choosing The Right Debt Consolidation Loan

Once you have evaluated all the debt consolidation offers you need to select the loan that fits your circumstances. You need to take into account the term , interest rates as well as the capital amount when making your decisions.

Once you have selected the right offer , you need to complete the paperwork and provide the lender with all the supporting documentation. Online applications are very convenient and you can APPLY HERE.

Next week we will go over a practical case study where you can see how a debt consolidation loan can save you money over the long run and relieve some of the financial pressure you may be experiencing.

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February 22 2011

Are Mortgage Orginators Still Relevant?

Posted by Editor Under Home Loans No Comments » |
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Until a few years ago mortgage originators were responsible for a large proportion of bank’s mortgage business. While the property market was good and bank’s were lending money, mortgage originators were handsomely rewarded for their efforts. In some cases mortgage originators were earning up to 1.75% with 1% of that paid to the referring estate agent. Business was booming and mortgage originators were making a killing while the going was good.

Over the last 12 months there has been a definite shift in this trend. Both Standard Bank and Absa Bank recently reported that their own internal channels generate the bulk of their new mortgage loan business. Some banks , Absa and Nedbank have actively followed a strategy of cutting out the middleman. Absa has started a marketing campaign whereby they actively incentivise their direct channels. If you take out a new mortgage via your branch they will pay up to 0.35% of the mortgage value into your bank account plus provide a discount of 50% on conveyancing fees. They are also running a competition whereby three new customers stand the chance to win R50 000 – paid into their home loan accounts.

There are some instances where it may be beneficial to use the services of a qualified mortgage originator. If you have experienced credit problems then a good mortgage originator can help smooth the process. Another case is where you are self employed - using a good mortgage originator can  make the process somewhat easier.

However you should be wary of using a mortgage originator referred by the Estate Agent especially when you have a good relationship with your bank.

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February 3 2011

Personal Loans Online

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It has never been easier applying for a personal loan. All banks offer personal loans and you can even apply at selected retailers who have partnered with major banks and provide personal loans under their own brands. If you don’t feel like leaving your home you can even apply online at various websites - including loanfinder.co.za.

You will still need to meet the credit criteria of the various institutions , but the days of making an appointment with your bank manager are long gone. In fact applying online provides you with several distinct advantages that you just don’t get if you were to approach your bank.

These are some of the advantages of applying for a personal loan online ;

  • The most significant advantage is the convenience factor - you fill in an online form and fax off some details and usually receive an answer within 24 hours , without even leaving your home.
  • Fast approval - although banks are geared to approve quickly the online process is set-up to reduce any delays in the application and approval process.
  • Typically most online personal loan providers use the services of a few banks and lenders and are therefore able  to shop around for the best deal for you. In some cases the interest savings can be quite significant.
  • Even if you don’t have a clear credit record many online providers will be able to assist you with a personal loan. In most cases the major banks will not be willing to take on these cases.

It may seem like the days of personalised banking are over where the bank manager actually knew you by name. Modern banking has become very impersonal and most banks despite what they say in their advertising only see you as a number and don’t really care about your personal situation.  Consumers are starting to take more control of their personal finances in this environment and using the services of online loans providers is an important step in taking charge. If you need a personal loan you can apply online - CLICK HERE.

What should you keep in mind when applying for a personal loan online ,

  • Basically the same considerations that apply when applying at your local branch. The most important issue is can you afford the repayments.
  • What is your current level of debt - all lenders will look at this.
  • Consider all the options available - make use of the financial calculators available here . These can provide you with useful information on repayments and also allow you to test various scenarios and assumptions.

Making an informed decision using all the resources available online has made life significantly easier for consumers and prospective lenders.

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