Home buying activity has increased substantially over the past 12 months, even though only about four out of every 10 bonds granted are for 100 percent of the purchase price.
In order to urge parents and relatives to seriously consider giving assistance to younger people, there are at least three avenues open to them: they can lend the young person the cash for the deposit and the transfer costs ? usually at a satisfactory interest rate ? or they can sign on with the bank as joint owners and joint bond applicants.
This is according to Rudi Botha, chief executive officer of BetterBond who notes that the number of bond applications made by prospective buyers has been increasing steadily for the past 12 months.
Botha explains that this suggests that buyers have come to terms with the new home financing regime imposed in the wake of the National Credit Act and the global financial crisis, and are doing ?whatever it takes? to be able to go ahead with their home purchase plans.
?They see property prices going up again, and they don?t want to miss the boat, and at the same time, rentals are continuing to rise due to a shortage of properties to let.?
The BetterBond monthly statistics ? which represent a quarter of all residential mortgage bonds being registered in the Deeds Office and include applications to, and bond grants from, all the major lending banks in South Africa ? show that the percentage of bonds granted for 100 percent of the home purchase price has averaged 40 percent for the past 12 months, meaning that six out of every 10 successful applicants have had to pay a deposit.
What is more, the average deposit requirement (except for first-time buyers) has risen back up in that time to almost 20 percent or one-fifth of the home purchase price, says Botha.
?On top of that, the average price of homes being bought by those applying for loans through BetterBond has climbed 9 percent to reach R893?000 at end-October.?
Among first-time buyers, who account for between 35 and 40 percent of the home loans granted every month, the average home price has climbed 13 percent y/y ?to R629?000 at end-October, and the average deposit required is around 12 percent of the purchase price.
He notes that home buyers who do succeed in obtaining a 100 percent home loan currently can often only do so by agreeing to pay a premium interest rate as high as three or four percent above prime.
The BetterBond monthly statistics ? which represent a quarter of all residential mortgage bonds being registered in the Deeds Office and include applications to, and bond grants from, all the major lending banks in South Africa ? show that the percentage of bonds granted for 100 percent of the home purchase price has averaged 40 percent for the past 12 months, meaning that six out of every 10 successful applicants have had to pay a deposit.
?And yet they are happy to do so, even if it means buying a cheaper property, because there is a steadily growing appreciation of the longer-term financial advantages of being a homeowner, as well as an awareness that the property market is on an upward path once more, albeit slow.?
Meanwhile, Tony Clarke, managing director of the Rawson Property Group says even relatively affluent young people earning substantial salaries these days can find it very difficult to become homeowners.
Clarke says the first hurdle to overcome is to prove to the mortgage lenders that they, the applicants, are creditworthy ? but often it is even more difficult for young people to raise the 10 to 20 percent deposit required and to find money to pay the transfer fees.?
This has proved an insurmountable barrier for many, he says.?
He explains that previously, it was accepted that parents, relatives or friends would often step into the breach and help young people to become homeowners.?
However in today?s more selfish and materialistic world, family ties have been weakened and this type of help is not given as readily as before.
In order to urge parents and relatives to seriously consider giving assistance to younger people, there are at least three avenues open to them:?they can lend the young person the cash for the deposit and the transfer costs ? usually at a satisfactory interest rate ? or they can sign on with the bank as joint owners and joint bond applicants.?
The banks are not averse to this type of agreement, as it has generally worked well for them.?
Alternatively, they can sign with the bank to stand surety for the loan (in all cases it is always a condition of the bank that value is found in the property), he says.
Deals of this kind need not be risky because, firstly, the interest rate can be above average and, secondly, the agreement can include a clause which allows the lender or partner to take ownership of the property ? often without compensation ? if the borrower or partner defaults on his monthly payments.?
In these situations, the defaulter can sometimes become a tenant, points out Clarke.
He says that because renting can often give the young person a more prestigious home than buying, many opt for this.
Clarke adds that it has been shown time and again that home ownership gives status, stability and motivation to young people and this should, therefore, be encouraged by his or her family and by any others who have their welfare at heart.
Source: http://www.property24.com/articles/want-to-buy-a-home-family-can-help/16560
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