Forexpedia

Bonds fall into two categories ? bonds with a fixed interest rate and bonds with interest rates that fluctuate during the loans duration. Fixed interest rates are more popular because the client always understands where they stand with the interest.

Fixed rate bonds are popular among home owners because the rate will never change. Basically most owners do now want to do the math and sit down and constantly analyze a bond with a fluctuating interest. There is nothing wrong with that.

Most fixed rate bonds run between twenty to thirty years, which is definitely a long time. A lot of people would rather stick to something around fifteen years, which is fine if they have a higher than average equity along with an income sufficient to meet the higher monthly payments.

Theoretically banks should tailor the loans around the customer’s needs and concerns. I reiterate that theoretically it would be nice. Unfortunately banks are not willing to do business this way. They will only offer bonds based on five year increments and prefer a bond somewhere in the range of fifteen to twenty five years.

Others prefer bonds where the interest rate constantly is adjusted. This is smart because sometimes the interest rate is fixed to begin with and slowly will adjust over time. Banks are more inclined to stay flexible with individuals who take out loans with adjustable interest and will accommodate their needs.

For example, a homeowner can request their interest be recalculated. The bank is obliged to handle this request and will gladly adjust the interest rate for a fee.

On the opposite end, the bank will constantly adjust the interest based on a decreasing economy. These increased interest rates are tough to handle but it comes with taking out a loan.

On average, people prefer fixed rate mortgages because they find them simpler and less hassle.

There is mounting evidence that even South Africa is not immune to the current credit crisis that is affecting the entire globe. It should be mentioned first that home prices are continually dropping. Statistics that were releases by bond originator ooba state that the home prices have fallen 6.6 percent overall compared to last October. Broken down into simple terms, it basically means that a house that is sold last year would have brought R803,908, would only bring in R751,118 in October of this year.

A second indication of our poor property market is that potential homeowners are finding it difficult to get financing. Banks are being very cautious because of the credit crisis, the National Credit Act and economic outlook. Even though the rate of home loan declines are down 1.4% it doesn’t really dent last months rate of 51%.

Another reason for banks to tighten their lending is the rising number of homeowners who are late on their installments. In the third quarter of this year alone, the number of loans more than two months behind rose 21.5%.

What is a potential homeowner to do in this market? It is important to note that decline rates vary from one bank to another, so take the time to try applying with other banks before you give up completely.

Obtaining a home loan is not what it used to be. Simply having a steady job will not qualify you. It is essential that you have a positive credit rating. Lenders require that an applicant be able to prove their ability to make the required payments. Be sure that you have not defaulted on any other payments in the previous two years before submitting an application for a home loan.

Lenders are looking for stability in their borrowers, as evidenced through a good record of paying of credit card debt, hire purchase obligations and any other form of debt. A history that shows you have already successfully managed a home loan will also go a long way with lenders.

Be honest about your credit history. It is best to let lenders know the truth about everything, even the rough spots you may have had. This allows them to work with you and see that you are truely serious about your obligations. Opening a savings account for your home deposit fund will also show how serious you are but usually require a 10% deposit, but that also varies bank to bank.

The maximum your monthly installment should be is 30% of your total income, and it is better if it is less. Banks won’t give you a second look if you don’t meet this prerequisite.

When thought about all in one, the property market today is one filled with great amounts of frustration. In one corner you have sellers that are having a difficult time finding someone to buy their home, and may be forced to reduce their prices, which works out quite well for the buyer. Although it is getting increasingly harder for buyers to secure financing.

If you are thinking of purchasing a home,it is very much worth your time to explore each avenue to receive a home loan as long as you are able to afford the payments and you have a job stable enough to allow the commitment.