Mortgage Smart

Expert advice and the best rates to suit your home financing needs

Expert advice and assistance from Smartbridge to get the best possible deal at the best mortgage rates to suit your home financing needs. You can also remortgage with Smartbridge. Switch to a lender that offers better interest rates and conditions to suit your changing financial situation and needs. Terms and conditions apply.

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Smart Questions

What is a mortgage?
How much can I borrow for a mortgage?
Do I need to put down a deposit to buy a house?
When and to whom is the deposit paid?
Does the size of the deposit matter?
What additional costs are associated with mortgages?
What are transfer fees?
What are conveyance fees?
What are bond registration fees?
What are valuation fees?
What are initiation fees?
What are mortgage broker fees?
How much will my mortgage interest rate be?
Which type of mortgage is best?
Can I still get a mortgage if I have a bad credit rating?
How do lenders structure a mortgage?
How do I apply for a mortgage?
How do I calculate my maximum monthly mortgage payment?
I have additional sources of income, how will this affect my mortgage application?
I receive a rental income, how will this affect my mortgage application?
Can family members make a contribution to my mortgage application?
I earn commission, how does this affect my mortgage application?
Is my annual bonus taken into account in my mortgage application?
I am self-employed, how will this affect my mortgage application?
My partner wishes to contribute to my mortgage application, is this possible?

What is a mortgage?

• A mortgage is a loan that is secured on immovable property, normally your home, hence the term “home loan”.
• The mortgage is lent to you in a lump sum to pay for the property and is legally bound to the property by the attorneys who register your mortgage bond. You then have to pay back this mortgage over a given length of time.
• This time period is usually 20 years, but it can vary between 5 and 30 years depending on circumstances.
• If you don't make payments as agreed, the lender has the right to sell your property in order to recover their money. This is rare but it is important to understand from the outset that if you do not keep up with your mortgage payments you are at risk of losing your home.

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How much can I borrow for a mortgage?

• This is often one of the first questions to be asked.
• Unfortunately it is not an exact science and all banks have their own methods to calculate affordability.
• Since the introduction of the National Credit Act this has become more complicated.
• The most accurate method of establishing how much you are eligible to borrow is to contact your Smartbridge mortgage consultant.

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Do I need to put down a deposit to buy a house?

• Whenever you sign an offer to purchase you will be asked to put down a deposit.
• This will range from a few thousand Rand to 20% of the property price depending on the seller and estate agent.
• The act of putting down a deposit is an act of goodwill and is a show of commitment.

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When and to whom is the deposit paid?

• The deposit is usually paid within a time period stipulated in the offer to purchase. This time period is for you to negotiate with the estate agent, but the norm is 2 weeks from the date of signature. This deposit does not go to the seller but is paid into the conveyance attorney’s trust account. Some estate agents may ask you to pay the deposit into their trust accounts.
• These trust accounts are interest bearing. If your deposit is going to be sitting there for a long time before transfer, be sure to ask the attorney what the rate of interest is on the trust account in order to know how much interest you will be earning on it.
• Some lenders will offer loans, particularly to first time homeowners, to cover the purchase price and also the additional purchase costs. This is commonly known as a 108% home loan (because it is 8% more than the value of the house). If you are planning on applying for a 108% loan you will probably still have to put down a deposit to secure the property when you sign the offer to purchase. This deposit will only be released back to you on transfer.

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Does the size of the deposit matter??

• Generally the larger the deposit (as a percentage of the value of your house), the better the interest rate you can negotiate with the bank.
• This is because the lenders know that if you default on your loan and they repossess the property, there is more chance of them getting their money back on the sale of the property. Hence there is less risk to the lender.
• The larger the deposit you put down, the lower the rate of interest you are likely to get.
• A larger deposit also reduces the risk of you going into negative equity, where the value of your house falls below that of your mortgage. This makes it difficult to sell your house because the proceeds won't cover the debt you owe.

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What additional costs are associated with mortgages?

The main additional costs are:
• Transfer fees
• Conveyance fees
• Bond registration fees
• Valuation fees
• Initiation fees

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What are transfer fees?

• Transfer fees are payable to the South African Revenue Service (SARS) whenever you buy a house valued at over R500 000. • Calculated as a percentage of the purchase price and vary according to the purchaser's legal status.
• The transfer duty is paid by the purchaser of the property prior to registration of transfer, or within six months of signing the agreement.
• There is a penalty fee for late payment of transfer fees.
• Contact your Smartbridge mortgage consultant to work out your transfer fees.

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What are conveyance fees?

• Conveyancing (attorney) costs.
• The conveyancing attorney is appointed by the seller, but paid for by the buyer.
• Conveyancing fees are on a sliding scale that your Smartbridge mortgage consultant can give you.

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What are bond registration fees?

• Bond registration (attorney) costs.
• The attorney registering your bond will charge a fee.
• They receive instruction from the bank that has approved your home loan, draw up the paperwork, do FICA checks and lodge this with the Deeds Office.
• These attorneys should be in touch with you within a week of your mortgage being approved. They will ask you to come into their offices to sign the necessary documents.
• Bond registration fees are charged on a sliding scale.
• Your Smartbridge mortgage consultant will be able to inform you how much these will be.

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What are valuation fees?

• Bank valuation fees.
• After the introduction of the National Credit Act the banks no longer charge a valuation fee but have included it in their increased initiation fee.

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What are mortgage broker fees?

• Mortgage brokers are paid a commission by the lender for every mortgage organised on behalf of their clients. A mortgage broker should not charge their client a fee.
• As a client, always ask your mortgage broker about their commission relationships with lenders. Good brokers will always disclose this information.
• You will require significant additional funds to cover the deposit and fees. Remember to include these costs when calculating how much you can afford to spend on a house.

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How much will my mortgage interest rate be?

Your mortgage interest rate will depend on a number of factors such as:
• The loan to value ratio (the size of your mortgage compared to the price of the house you are buying or own).
• Your repayment to income ratio (the cost of your monthly mortgage repayment to your gross monthly income).
• The size of your bond.
• Your credit profile.
• Contact your Smartbridge mortgage consultant for advice on your likely interest rate.
• The interest rate charged on your mortgage is crucial. It will determine how much you can afford to borrow and therefore how much you can afford to spend on a house

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How is mortgage interest charged?

• In South Africa, interest is generally charged daily on your mortgage.
• Some lenders will allow you to pay your mortgage payments twice a month. This will dramatically reduce the amount of interest you will pay over the lifetime of your mortgage.
• Speak to your Smartbridge mortgage consultant for more information.

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Which type of mortgage is best?

• Most people will want the cheapest deal they can get on their mortgage.
• You may have to compromise on cost in order to get something that is more flexible.
• Fixed-rate deals are popular in the rest of the world but few South African mortgages are on a fixed rate. This is due to the uncompetitive rates offered by banks on fixed mortgages to offset the risk of volatile interest rates.

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Can I still get a mortgage if I have a bad credit rating?

• This depends on how poor your credit history is.
• If you are simply in arrears on a few accounts then the banks will consider you as having a poor payment profile.
• If you use a good mortgage broker then they should be able to explain your situation to the lender, and if you have a good explanation for it then it may be possible to arrange a mortgage.
• If you have any outstanding judgments or listings then the lenders will not look at your situation.
• The first step you need to take is to improve your credit rating by doing a credit check, finding out what is reflected and settling your accounts. Once you have settled them and have the letters confirming that then speak to your Smartbridge mortgage consultant about applying for a mortgage.

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How do lenders structure a mortgage?

• The lenders take the loan required (this is known as the principal sum) and then work out the interest you will owe them over the full term of the mortgage.
• This is in effect an additional sum you now owe the lender.

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How do I apply for a mortgage?

• Contact your Smartbridge mortgage consultant for the best possible deal. • You can also apply directly to your bank. • Make sure you have as much information as possible when applying for a mortgage. This means exact salary details for you and your partner, exact details of expenses and debts, when bonuses are paid and details of any loans/mortgages already held. • When you are ready to apply for your mortgage, you should aim to complete the process quickly as lenders will state a time period during which they will guarantee the rate you have been quoted. This means you won't be affected should interest rates rise. You will then have to wait to see if your mortgage is approved.

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How much will my mortgage be worth?

• A mortgage lender will lend you money based upon what they think you can afford to repay on a monthly basis. • Your maximum monthly mortgage payment used to be calculated as roughly 30% of your gross monthly income. Currently, under the National Credit Act, lenders now have to base your eligibility calculations on your monthly disposable income. • Banks normally add in a buffer amount to account for interest rate rises etc. So you may actually only qualify for 85% of your maximum monthly mortgage payment. • A lender will carefully study your bank statements to check that the expenses you have declared correspond with your accounts. Lenders have access to the Credit Bureau’s information, so they can check that the liabilities you have declared are correct. • If you keep and are able to present detailed proof of your finances you may qualify for a bigger mortgage. • Under the National Credit Act, the consumer has been granted protection against reckless credit lending. However, if you fail to fully and truthfully disclose your available disposable income, you must be prepared to forfeit this privilege.

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How do I calculate my maximum monthly mortgage payment?

Your maximum monthly mortgage payment is based on your monthly disposable income. To calculate your monthly disposable income: • Subtract all your deductions such as tax and UIF from your gross income to get your net income. • Calculate your total monthly expenses, such as groceries, car insurance etc. • Subtract your monthly expenses and existing debt such as credit card, vehicle finance, or loan repayments from your net income. • The balance (if there is any) is your potential maximum monthly mortgage payment.

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I have additional sources of income, how will this affect my mortgage application?

• Lenders will take into account additional income you may have such as rental income, investments and dividends etc. • Lenders vary in how they view additional income streams. • Contact a Smartbridge mortgage consultant to assess and discuss your options.

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I receive a rental income, how will this affect my mortgage application?

• Lenders usually take into account 50% of your rental income on a rental property. • It is up to you as the borrower to prove this income. • You must be able to show money going into your bank account and lease agreements. • The longer the lease, the more lenders will value the rental income.

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How do lenders structure a mortgage?

• The lenders take the loan required (this is known as the principal sum) and then work out the interest you will owe them over the full term of the mortgage.
• This is in effect an additional sum you now owe the lender.

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Can family members make a contribution to my mortgage application?

• Yes. • You can take into account contributions from family members if they are living on your property. • If a partner or child is making a contribution to the family finances, then the banks will recognise it. • It is your responsibility, as the borrower, to prove these family contributions.

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I earn commission, how does this affect my mortgage application?

• If you are a commission earner the banks will take this into account. • The best way to prove this to the bank is to provide pay slips for six months and then to calculate your average monthly commission earned.

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Is my annual bonus taken into account in my mortgage application?

• Yes. • Annual bonuses are taken into account but you will have to prove them with entries on your bank statements and letters from your employer.

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We have a highly trained support staff ready to assist you - Contact a representative

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