Wondering how the banks are viewing mortgage lending this year? Well the latest Loan to Value criteria have been released and its all looking quite a bit more positive. In fact the risk appetite from the four major banks increased considerably in the last year with the bond approval rate increasing from 55% in 2011 to 78% in 2012. In addition deposits amounts required have decreased with the average deposit for 2012 at 15.4% compared to 23.4% in 2011.
100% loans are back on the table (for real), so if you are salaried and looking to buy a residential property for R1.5million or less, your chances are really good. However if you have your eye on a more expensive property, FNB is the only bank to offer their own salaried clients up to 100% loan on properties of R2.5million and under. If you are self employed, the banks will still lend you money, however you will only qualify for an 85% to 90% loan. One unofficial rule of thumb these days is that if you apply to your own bank, then you will have a better chance of securing your loan.
When it comes to vacant land, the lending rate is still much lower with a maximum of 60% offered by most banks – except Nedbank who will only consider vacant land as part of a building loan. Vacant land to the banks means residential land up to a maximum of 7.8 hectares or less in some cases. If you want a better chance of getting a loan, then you should consider a building bond where you will be able to get up to 95% of the combined total of the stand and building value. Be warned though that your bank will ask you to provide 5% of the entire combined loan upfront when purchasing your stand. Some banks may provide you with a loan for this deposit but watch out as it will not be part of your home loan, but a separate unsecured loan, with much higher interest rates.
If you have always wanted to own a farm, it is Zest Property Group’s experience that you will most likely not get finance for more than 50% of the value of the property. This means that you need 50% cash in hand if you want to present a strong offer. Jaco Ellis, Mortgage Specialist QFin Bond Originators, says that most agricultural loans must be submitted to the local branch which then forwards the application on to a special agricultural department. Ellis expands, “The type of loan on farms depends largely on the type of farm being purchased, with distinction being made between:
Buying for farming activities in which case finance is seen as very high risk and in most cases subject to a term of 5-15yrs and at an increased interest rate.
Buying for leisure purposes aka “a weekend farm”. This will typically be a client with an existing property which may also hold security that can be used to secure the purchase. It is seen as a luxury purchase but may be look at more favourably than option 1.
Buying a farm as a main residence. This will normally be seen as a standard residential purchase at conventional bank lending rates.”
The average time it takes for an approval can range on average from 5 working days for a straightforward residential loan to approximately 14 working days for a building loan. Average agricultural loans can take up to 14 working days or longer.
A bond originator can increase your chances of a successful application by assisting you in preparing and motivating your application. Their knowledge of the banks’ system will take the stress out of negotiating rates and products with the lender. Bond originators specialises in Home Loans where most bank staff handle a variety of products.