A guide to home buying for the self-employed

A guide to home buying for the self-employed

Article courtesy of Marita de Wet from Ooba

A guide to home buying for the self-employed

The misconception exists that it is near impossible for entrepreneurs, or individuals who work for themselves, to enter the property market, due to the banks’ very strict lending criteria. However, securing home finance if you are self-employed is not impossible.

This is the view of Careen McKinon, Provincial Sales Manager from ooba, South Africa’s largest bond originator, who says that it is important for this segment to be represented in the property market.

10% of applications received in Q3 2015 consisted of self-employed applicants, compared to 11% in Q2 2015 and 9% in Q3 2014. This is about half of the 20% level experienced in 2007, indicating that self-employed applicants are generally less confident about their ability to qualify for home finance.

But, says McKinon, if you do your homework, as with any other bond application, and seek the expert assistance of a bond originator like ooba to get you prequalified for a home loan, you will be better prepared to enter the property market.

“This instantly takes the hassle out of this process. If you opt to submit your application on your own, you run the risk of your application being denied which can negatively impact your credit record.”

So how can you increase the chances of your home loan being approved? The first step is to ensure that all your paperwork is in order. If you are self-employed, McKinon suggests that you submit the following when applying for a home-loan:

  1. Comparative financials covering a trading or working period from the last two years
  2. Letter from your auditor confirming personal income
  3. If your financials are more than six months old, you will need up-to-date signed management accounts
  4. Cash flow forecast for the next 12 months
  5. Personal statement of assets and liabilities
  6. Personal and business bank statements (6 to 12 months, depending on the banks’ requirements)
  7. Latest IT34 , which is confirmation from SARS that your tax affairs are in order
  8. Company, CC or Trust statutory documents
  9. ID documents for all the directors, members or trustees.

Although this list seems rather daunting, it is all the more reason to use an expert to guide you through the process, as this will get you one step closer to acquiring a home loan. “It is imperative to have your tax affairs and finances in order and up to date. In addition, it will help to separate your personal and business expenses,” says McKinon.

She says that self-employed applicants generally undergo a longer home loan approval process than individuals who are not self-employed.

“Maintain a good credit record and ensure you have all the required paperwork, as this will increase your chances of your home loan application being approved faster,” concludes McKinon.

Article courtesy of Marita de Wet from Ooba

Transfer duty and the 2015 budget speech

Transfer duty and the 2015 budget speech

On everyone’s lips during February was the anticipated budget speech on the 25th of February and the implications thereof on our pockets. Clearly there are many other economic factors, but for the man in the street the most important detail would be how our personal budgets would be affected.

Double-digit growth in new housing

Double-digit growth in new housing

Residential building statistics

Double-digit growth in new housing planned in 2014, with the construction phase contracting from the previous year

Growth in the planning phase of residential building activity in the South African market for new housing, as reflected by the number of building plans approved by local government authorities, was in 2014 at its highest level in more than 10 years. However, the construction phase of new housing, i.e. the volume of housing units reported as completed, contracted for the second consecutive year. These trends are based on data published by Statistics South Africa in respect of building activity related to private sector-financed housing (see explanatory notes).

The number of new housing units for which building plans were approved increased by 12,6% to a total of 56 871 in 2014. This was the strongest growth since 2002, with the volume of plans approved at its highest level since 2008. The segments of smaller-sized houses (<80m²) and flats and townhouses were the main contributors to the increased level of plans approved. These two segments of housing were also a strong focus of housing supply over the past two decades (see table on page 2 of the report). Although not all housing planned will eventually be built, the expectation is that the marked improvement in the planning of new housing in 2014 will be reflected in the construction phase in due course. To read more please click here to download the full article compiled by Jacques du Toit, a Property Analyst with Absa Home Loans

New Physical Addresses

New Physical Addresses

Physical Addresses in Silver Woods Country Estate have been updated

The City of Tshwane Municipality has issued new physical addresses to all stands and residences in Silver Woods Country Estate

All address numbers allocated the municipality should be reflected on the houses as stipulated in article 69 of the Ordinance of Local Government (Transvaal) no.17 of 1939 (as altered).

All owners are requested to ensure that the allocated street numbers are affixed to a visible place on their property.

It remains the responsibility of the residents to inform all their correspondents so as to rectify their physical address.

This web site has been updated to reflect the new physical addresses on the Stand Availability page

Map of Silver Woods Country Estate with new physical addresses

Please click the image below to download the official

SW Physical Addresses

Residential Market Review

Residential Market Review

This was shared with me from Inge de Klerk of Pam Golding Properties. Written by Stuart Murray – Co-founder and former editor of Finance Week magazine, the Review provides comment on, inter alia, the increasing average home purchase price, increased sales volumes and stock shortages in the residential market of South Africa.

The housing market has shown considerable improvement since the start of the year and is indicating consolidation of this rising trend, both in increased sales volumes and rising values. Overall first quarter results in April will confirm this steady upward progression.

Pam Golding Properties CEO Dr Andrew Golding reports: “Results to February 14, the end of our financial year, indicate sales by value are up 25%. We have had an excellent year, significantly exceeding budget.”

Mortgage originator ooba says that in February the average home purchase price increased by 5,4% year-on-year.
The buyers’ market of the post-recession years has turned, quite dramatically, to a sellers’, emphasised by widespread stock shortages. The backlog of unsold homes on the market is fast being absorbed, Dr Golding notes.

According to the latest FNB House Price Index the average house price for February rose 8% year-on-year. The bank’s Market Strength Index also points to further strengthening of the housing market. The bank’s property sector strategist John Loos comments: “The combination of 8% house price growth and a slightly higher prime rate should continue to keep the market by-and-large healthy…” Loos adds that over all “it still appears to be a case of a well-balanced market, largely free of irrational behaviour despite being propped up by a very weak and unbalanced economy.”

That the market remains solid is underlined by the Reserve Bank’s most recent report of property transfer duty revenue which in January reached a 49,4% year-on-year growth rate on value (see graph)

Transfer Duty Revenue Graph


Access to mortgage finance is still the main stumbling block to a significant overall revival, coupled to a host of negative influences on households such as poor income growth and ever-rising costs, complicated by transport, electricity, municipal rates and utilities charges . The unexpected 0,5%interest rate increase which brought the mortgage (prime) rate to 9% also shook consumer confidence. Absa Bank cautions: “Against a background of persistent financial pressure, consumer credit-risk profiles continued to deteriorate up to late last year and adversely affecting access to credit.”

Nevertheless, the granting of new bonds is on the up and up, According to Standard Bank: “Household mortgage balances have improved of late, with this momentum boding well for household demand.” Ooba reports that there has been a sharp fall (5,6%) in the average deposit required by banks.

The credit squeeze remains with us; however, a new, powerful, influence is beginning to direct the housing market – that of shortage of stock. In 2011 stock shortages as cited by agents was virtually nil; this has risen to a national average of nearly 20%, with a number of “hot spots” – Cape Town for example – where stock constraints are having the effect of pushing up house prices. Similarly in KZN, where, according to Carol Reynolds, PGP’s area principal in Durban, Durban North and La Lucia, the 2014 housing market has begun “with gusto”, adding “most of the metro areas are seeing stock shortages and there is a resurgence of buyer activity. Correctly priced properties are selling within the first few weeks of being listed.”

Laurie Wener, PGP’s MD for the Western Cape region, comments that the rise in the property market has resulted in a shortage of stock in most areas. “The middle residential markets in the Southern Suburbs and on the Atlantic Seaboard and City Bowl, between R4 million and R9 million are extremely buoyant with a high percentage of cash sales – over 60%.

“The return of the international buyer and property investors has stimulated interest in apartments, transforming a substantial excess of supply in stock since 2007 to an acute shortage over the past 12 months, especially in the V&A Waterfront and all along the Atlantic Seaboard, the City Bowl and Central City.”

Jonathan Davies, joint manager for Hyde Park, PGP’s main office in Gauteng, says that the shortage of stock sometimes results in homes being sold above asking price due to competing agents, particularly in the lower and middle segments of the market. Owners in more elite suburbs have been able to pick their time to sell.

He adds: “Shortage of stock has put pressure on estate agents without the strength of a brand.”

These stock shortages are partly the result of a badly-underperforming building industry over many years which has only recently got back on its feet again in terms of residential building activity – and then mainly in the development of flats and townhouses. Cost pressures, of course, including the rising cost of land, have played a significant part in the industry’s woes and this has resulted in the cost of new houses far exceeding that of existing homes. This in turn increases demand for existing houses. Latest statistics to hand from Absa show that it is 33,8% cheaper to buy an existing house than a new one – but that the gap is narrowing.

A “bubble” is when market prices rise way beyond where they should be in terms of the economy and other fundamental indicators.

While Britain’s “Help to Buy” scheme is intended to support the building of 10 000 new homes,the UK government is now under pressure to further assist the building sector. Shadow Chancellor Ed Balls has urged his Conservative counterparts to cut the “Help-to-Buy” guarantee to 400 000 pounds sterling and use the balance to give small and medium builders better access to finance.

A must read for first-time buyers

A must read for first-time buyers

First-time buyers – a little patience required

First-time buyers continue to dominate the residential market, as young couples and newly-weds take the plunge into family life. In fact, mortgage originator ooba reports that in June 51.7% of its bond applications were from first-time buyers.

Most analysts consider that first-time buying is a good indication of market conditions and, given this segment’s high dependence on credit, whether bonds are easier to obtain – or otherwise. According to a survey by FNB, in the second quarter of this year, first-timers were estimated to make up 22% of total buying.

In recent years, as the residential market gradually recovers from the slump, many young buyers have been forced to wait, remaining in their parents’ homes or renting. Now they are returning to the market as a significant force. However, for the starry-eyed, eager to set up that dream home, a little patience is required. Delays in the process of finding and owning that first property can be more than a little frustrating.

Conveyancing attorneys STBB issued a caution in June that the turnaround in the Cape Town Deeds Office had slowed considerably, with transfers taking 15 days and more to register.

Similar delays are being experienced countrywide. Mortgage bonds, too, take their time. In fact, according to ooba’s statistics, it takes an average of 69 days for a bond to go from being granted to being registered.

According to Careen McKinon, ooba’s direct sales manager,

“buying a home is one of the most exciting but daunting things you’ll ever do. There is so much paperwork and communication between various intermediaries. However, the good news is that you’ll have lawyers acting on your behalf so all you really have to do is wait.”

A step by step guide

> You and the seller sign the offer to purchase

> The bank grants your bond and instructs the attorney to register it.

> The seller advises the transferring attorney to transfer the property. The title deed and cancellation figures are requested by the bank where the current bond is held and a statement of rates and taxes is requested from the local authority.

> The bond attorney tells the transferring attorney the amount available for guarantees and requests the draft deed of transfer and guarantee requirements.

> The cancellation attorney is asked to cancel the seller’s bond upon receipt of a guarantee for the amount owing.

> The transferring attorney receives the title deed and cancellation figures and sends a copy of the deed of transfer and the guarantee requirements to the bond attorney. The transferring attorney requests the buyer and seller to sign the transfer documents. The buyer pays the transfer costs and the transferring attorney then pays the rates and taxes and the transfer duty.

> The bond attorney prepares the bond documentation together with the relevant account. The buyer signs the document and pays the costs. The bond attorney prepares and issues the necessary guarantees, forwards them to the transferring attorney and prepares the bond documents for lodgement at the Deeds Office.

> Once the transferring attorney has received the guarantees, they are forwarded to the cancellation attorney.

> The cancellation attorney obtains consent for cancellation from the bank which holds the seller’s bond.

> After all the documentation has been signed and the costs paid, the transfer, new bond and cancellation bond documents are prepared by the respective attorneys for lodgement at the Deeds Office,

> All documents lodged, the Deeds Office checks the documents. This can take up to three weeks before they are ready for registration simultaneously by the attorneys.

> On the day of registration, the bank pays out the loan in accordance with the guarantees issued.Final word from Careen McKinon: “Allow at least three months for the registration and transfer of the bond.”

Home loans for different age groups

Home loans for different age groups

People of different ages have different housing requirements but they also face different challenges when trying to obtain a home loan.

Retired or almost retired borrowers, may well have low debt, significant assets and high home equity, but may also be on a fixed income. And if that income is lower than what they used to earn can hinder the approval of a home loan for their retirement home. Some banks may also be reluctant to grant new 20-year mortgages to senior citizens.

According to the latest statistics from BetterBond Home Loans, which is SA’s biggest mortgage origination group, home buyers over 60 years of age are now typically buying properties worth around R1.2 million and having to pay an average deposit of some R470 000 (39 percent) to do so.

This puts their average bond repayment at R6 700 a month and the income required to secure the bond at R22 500 a month.

BetterBond CEO Shaun Rademeyer says, however, if they’re not sure that their earnings will continue at this level, or are worried that that their expenses, particularly in regard to health, will rise substantially over the next few years, they need to consider other options.

“One is to lower the monthly repayments by paying an even bigger deposit, but a much better idea would be to set their sights on a lower priced home, preferably low-maintenance and in a good area or retirement village where they would be happy to live long-term.”

That way they can put more of the cash from the sale of their family home into their ‘retirement fund’, save on maintenance and property rates, and still improve their chances of being granted a loan, he says.

By contrast, first-time home buyers in their 20s and early 30s may well have plenty of income to support a home loan application but a big debt load that hinders them from being approved.

“Banks are only interested in ‘disposable’ income – what is left after all debt payments and regular expenses have been deducted – when considering a loan application, so what buyers in this age group need to do is pay off any other debts as fast as possible until their disposable income will comfortably cover the monthly home loan repayment,” he says.

The BetterBond stats show that home buyers aged between 20 and 30 typically buy properties costing about R715 000, with a deposit of about R67 500 (9.5 percent), which puts their monthly bond repayment at just over R5 600 a month.

Some banks do have special programmes for first-time buyers that allow them to buy without paying a deposit (100 percent bonds), but they should bear in mind that this will increase the monthly bond repayment.

As for home buyers in their late 30s, 40s and 50s, their most frequent need will be to buy a bigger home to accommodate a growing family, whether that means more children, aging parents or both.

Rademeyer says these buyers will usually have enough equity in their existing homes to cover the deposit, or most of it, on their new home, but an expanding family generally means higher monthly expenses so, although they probably have plenty of earnings, they also need to minimise other debts like car repayments and credit card balances in order to look good to a lender. “At the same time, they should not be neglecting their own retirement savings, which means they should resist buying to the maximum of their financial capacity.”

According to the BetterBond stats, the average buy price for home buyers in their 40s is currently R990 000, on which they are paying a deposit of around R191 000 (19 percent). This puts their average bond repayment at about R6 950 a month while those in their 50s are paying around R7 100 a month, on average.