Are you a first-time buyer and are you purchasing a house to live in? Have you bought and sold and just want a nicer place to live? Or are you an investor, looking for the type of property that will give you a return as well as be a growing asset in your investment portfolio?
For the “first-timers” the major banks have various packages that give attractive terms to help people get their foot on the property ladder. They look at your salary and work out the best deal for you (and also for them) that could even get you up to 105% loan over 30 years. This is particularly attractive if you’re looking at the ‘affordability factor’ of the monthly bond instalment. The longer the term of the bond, the lower the monthly payment. If you cut the repayment term down, you would see an increase in your instalment. You have to choose what’s best for your pocket but it’s good to be aware of what the lower payments mean – you could end up paying twice or even three times for your house when you add all the interest up. What a lot of wise investors do, is to pay more than the minimum instalment and this reduces the outstanding capital owed to the bank and it means you pay the property off much sooner than you originally anticipated.
For those who want to invest, property has proven to be ideal for the following reasons:
- It is low risk and stable, offering good potential growth over a long term
- It is less volatile than other instruments, like stocks or shares
- It has consistently achieved long term capital growth
- It can generate regular income flow through ‘buy-to-let’ strategies
- It provides good tax benefits
The ‘Buy-to-let’ strategy can be a good way to use your investment to generate income that will pay off your property and also give you income while the value of the property grows. Buy-to-let home loans are often registered in the names of legal entities like trusts or companies. But it is possible to have them registered in the name of an individual and some banks will register a bond of up to 100%. In the case of a trust or a company however, a 10 to 20% deposit may be required by the financing bank.
If you go the ‘buy-to-let’ route through Igrow, we provide discounted costs on conveyancing and on the value-added services like property management fees and letting agents commissions.
But what do you do if you want to extend or improve your property? What’s the best way of doing this? How do you access additional funds?
You can re-finance your property! You can get a ‘re-advance’ that will allow you to withdraw the difference between the outstanding balance on your home-loan and the amount registered. For instance, if your bond is R500 000 and you have reduced it to R200 000 there is a potential amount of R300 000 available to you. Naturally, this is assuming that the affordability and value is in place. And no new bond needs to be registered – it’s the cheapest way to borrow money, and the wisest! This allows you to access surplus funds in your home loan by being able to withdraw it when you need it.
Or you could apply for a 2nd bond. If the value of your property has increased or you want to improve it, you can register a higher amount on your bond and then have access to that resource. For example, if your original bond was R600 000 and on revaluation the property is now an increased value of R750 000, it is possible to register an additional amount as a further advance. The problem with this method is that it will incur extra costs as far as bond and initiation fees are concerned – but it might be worth accepting those as a means of making sure the improvements can go ahead and the value of your investment property continues to rise.
Investing your own capital and making financial commitments as you use property investments, bonds and financing options to grow your wealth is a serious business and should not to be taken lightly. You need the very best advice that is available before making a final decision on how your money needs to be employed. For advice and guidance, look to the independent specialists who have the right team of professionals working with them that gives them the track record of success, integrity and security that you want.
The comforting thing about history is that it repeats itself. And in the property investment business this is no exception. Contact us at IGrow Wealth Investments – our team will help you on the road to achieving the success you deserve.
SOMETHING ELSE TO CONSIDER:
Whether you are applying as an individual, a business entity or on behalf of a trust, the team at IGrow is geared up to assist you with assembling all the documents you will need to complete the application process for financing:
- Copy if ID document
- Latest salary slip (or last 6 months if you earn commissions or work overtime)
- Last 3 month’s bank statements (or last 6 months if you earn commissions or work overtime)
- Lease agreements together with proof of last 6 months income received
- Statement of Assets and Liabilities
- Auditor or Accountant’s letter (if you’re self employed) confirming monthly earnings
- Last 3 month’s Business bank statements
- Financial Statements for last 2 years (covering 3 years) – cannot be older than 6 months
If a Trust is involved there will be additional documentation:
- Copies of all Trustee’s ID documents
- Copies of all Trust Beneficiary’s ID documents
- Statement of Assets and Liabilities for each Trustee
- Trust Accountant to provide letter stating who the Independent Trustee is, and that they have no vested interest in the Trust
- A Trust Resolution confirming who is authorised to sign and open a bank account on behalf of the Trust
- A Property Resolution, drafted by the Independent Trustee and signed by all Trustees
Lease agreements for all existing properties being leased, together with proof of last 6 months income received