Can I afford a 100% bond?
Category Residential Property News
"The sooner you can get into the property market the better" A very common statement that we all have heard before, but is it wise to take out a 100% just to enter the property market sooner than later? The first quarter of 2018 confirms that Betterbond, one of the bigger bond originators in our country, managed to secure 42,76% of all home loans at 100%. This is a bond without a deposit being approved by a financial institution. It seems that banks are more willing to grant these sort of bonds, because they can charge more interest as the risk is higher. Buyers who can pay a deposit presents a lower risk profile to the bank which brings about a lower interest rate. Buyers wishing to obtain 100% bond must first obtain professional advice or if you are dealing with a RE/MAX agent, they will be able to add some value to justify your decision. Make sure you can determine exactly the repayment of a 100% loan as well as all the monthly costs involved to calculate a budget. A very common method to use as a starting point is to calculate 30% of your gross income. This figure will be a good starting point in determining what amount can be contributed towards a home loan. For example, you earn R30 000 per month, 30% equals R9 000 and with current interest rates fluctuating around the 10% mark, you will be able to afford a home loan of R900 000. The question however still remains should you apply for a 100% bond? The truth is that, while it is advisable to rather put down a sizeable deposit for your home loan, if you want to enter the market sooner or later to rather identify a investment opportunity that has a low risk profile, for example a flat in a security complex that can be rented out. The general rule of thumb here is to calculate 0.85% of the purchase price as a reasonable rental for the unit. If that calculation doesn't make sense move on to a next investment opportunity until you find the best product that suit your needs. Make contact with a RE/MAX franchise like RE/MAX Oaktree who can provide you with a spread of investment opportunities. We are in a position to meet your needs and fulfil your dreams of owing your first property.
Author: Deon de Swardt