 Welcome to today's episode of the private property podcast with myself, Zaman Dunwa Kumalo, the State 20 of the national lockdown today. And of course, we'll be bringing you the latest in property news, bringing in different experts to help us navigate how to best make good decisions for our property. And unto nature, I'm joined by Stephen Whitcomb, who is the National Sales Manager at Beta Bond. And given that we've had a recent interest rate cut announced yesterday by the Reserve Bank Governor that took into effect today, we'll be exploring, you know, given the new interest rates, what are the three best financial steps when buying your first home? We'll also touch a little bit on if you already have a first home, and perhaps you want to add to your thinking off. And of course, if you want to be part of the conversation, you can send us your questions right here on Facebook, and we'll be sure to ask our guests. You can also share some of your questions on our other social media platforms. And if you've missed out on yesterday's episode or other episodes, we've already posted last night's episode on our YouTube channel. So you can always go back and watch that. And of course, I'd like to now introduce my guests. Stephen, thank you so much for joining us this evening. Thank you so much. Thanks for the opportunity. Now, you know, a lot of people are quite excited, or certainly people who are, you know, interested in property or have been looking at property, they're quite excited about this lower interest rate and want to look at different ways that they can take advantage of it. And of course, a very big demographic are probably people who wanted to buy their first home and already been looking and are now thinking, okay, perhaps I'm ready to make that offer. And I want to have a little chat about, you know, what are some of the financial considerations that they need to be thinking of as they embark on buying their first home? Sure. Go ahead. What would you like? So first of all, I think the interest rate reduction was amazing news for the country. Not only will it help protect existing consumers with debt and help alleviate some of their interest on their debt that they have, but for buyers looking to enter the market and buy a home, the prime lending rate is 7.75 currently. And I think that's the lowest it's been in several years. So really, a really good opportunity to take advantage of low interest rates. I think for buyers, whether you're buying for the first time or you're buying a second property or a third property, it's critical that buyers understand that first of all, how much they qualify for. I think that's the most importantly. Once you know what you qualify for, you would then be able to look at your personal financials or personal finances to ensure that you have sufficient funds to repay the bond that you're looking at at giving. And so Stephen, how would somebody actually be even able to assess how much they qualify for? So through a reputable bond originator, I think the best thing would be to do is for them to get pre-qualified. And we offer that service in better bond where buyers are able to approach us and request for a pre-qualification. And at better bond, what we do is we simply look at the client's declared income and many clients have various sources of income. So we look at all the sources of income that they have. We then critically look at the client's declared expenses. And when we issue a pre-qualification, we actually go into quite a lot of detail around what they've declared versus what, for example, is going through their bank statements to ensure that when we do issue them with a certificate, they know that when they go to market, it's really, really a good document to go to market because they know exactly what they qualify for. So Stephen, I actually wanted to take it a step back. I mean, you and I know a little bit about property and know what pre-qualification is, what a bond originator is. But I'm sure some of our listeners and people watching us at home might not have even heard of bond origination or pre-qualification. Perhaps explain what the pre-qualification process is, almost like you're explaining to someone who's never heard it before, so that we can begin to slowly understand the steps that you're essentially going to have to take when you decide to buy that first hold. Okay, so you asked a question of whether or not the viewers actually understand bond origination. So let me quickly touch on bond origination. I think that's more important. So buyers approach us in order for us to apply at various banks to get them the best home loan deal. So we have contracts with all the four retail banks together with some of the private banks and we're able to submit a client's application to multiple banks free of charge, getting them the best outcome. So that's basically in a nutshell what bond origination does. Our services are free of charge and we would then submit the client's application to all the banks. The banks would then present us with various offers and they might very well be all different, different interest rates, different loan amounts based on exactly what they assess in terms of the client's risk. We will then present those offers to the client and then the client will make a informed decision based on the best offer that suits them. And I tend to preach using a bond originator, especially in the early days of building your property portfolio. Myself, I've used bond originators previously when buying the various properties that I have. Can you just tell us what some of the benefits are of using a bond originator as opposed to perhaps approaching the various banks individually when you're ready to buy your new home? So we would submit one application. So the client with a bond originator would complete one application. If he was applying to various banks, he would have to approach each of the banks individually, complete individual applications, and the supporting documents would have to then, in terms of his pay, some bank statements, etc, would have to then be submitted to each bank individually if he approached them individually. We apply on behalf of the client. We complete one application, one set of supporting documents, and we submit that to the banks that meet the client's loan requirements. So if clients are looking for 80 or 90 or 100% loan, the purchase price, for example, is a million rand, and he's looking for a 90% bond, so he's looking for a 900,000 rand loan. He has a 100,000 rand deposit. We would look at which banks are currently viewing loan-to-value policies or the loan-to-value different policies of the banks, and we would submit to those various banks accordingly. It would only be one submission. We then get feedback from the banks. We follow up on the behalf of the client in terms of feedback. We get the outcomes. We get the approvals, and where we need to, and we often do, is we will negotiate the best interest rate for the client, because bearing in mind, we now submit potentially three or four offers on the table from now to then go back to the client's own bank, which we've applied to, together with other banks to secure not firstly the best loan amount, but also secondly the best interest rate. And I think for me, that was one of the things that I quite liked when I was using a bond originator was that you get, I think in one of the transactions, I got three different offers from three different banks, and the interest rates were different. So with all of them, they were granting 100% across the board, but the interest rates were different. So then I was able to say, actually, let's see if we can get the bank, like my preferred bank, to lower the interest rates based on the lowest offer. So you're able to essentially have that conversation with the bank, and almost have them essentially fight for your business as much as possible before you choose the bank that you actually want to go with. And I think it's just such a big component that people probably aren't even aware of, that you're able to do that with your bond originator, because, you know, the first offer that you get from a bank or the first grant that the bank says they'll be able to give you isn't necessarily the only one or necessarily set in stone. I mean, oftentimes banks might actually be able to, you're able to negotiate that rate lower with banks. So now, Stephen, what I want to also then look at is how do we then navigate what somebody can afford in the event where they already have their primary residence, for example, and they're looking to buy that additional property. So let's say you essentially stayed in your same job, so your salary hasn't really increased. And you're now perhaps obviously using the rental from, let's say, let's say, for example, you're even able to rent out one of the bedrooms in your house. So getting a little bit of extra income. How do you typically factor in that additional rental income? Because I know different banks use a different percentage of how much they consider it. They don't all consider it 100% income, some will do 50% or 70%. So how do you, as bond originators, essentially help your clients in making a case for themselves when trying to buy that additional property? But when it comes to additional properties and using existing rentals on properties that you already own, it does become a little bit more complicated. And using a originator just makes much more sense. And because we very aware of all the banks policies to your point, you've made the point that some banks will consider 70% of the rental, 50% of the rental, 100% of the rental. And it all depends where you bank. Will they consider because you bank with them 100% of the rental? So should clients try to apply directly at each of the banks, it can become quite complicated. This is what we do. In bond origination, we know exactly what the banks are looking at, what percentages they're looking at. And accordingly, we will advise customers on best ways to apply or plan their behalf to get the best outcome. But to answer your question, you're 100%. So banks will consider different percentages of your rent. So rather than if anyone has specific questions around specific banks and their rentals and what percentage they use, they can send in a question. It does get complicated. And for example, if you're currently living in your property, some banks won't consider the rent on that property for the purchase of a new property, because that would be seen as future rental. And future rental, some banks will not consider some banks will. It's another reason why you should be applying through a bond originator, because we know which banks will consider future rental and which ones won't. So if you're just joining us, this is a private property podcast. I'm your host, Zaman Dung Akumalo, and I've got Stephen Wittcombe, who's the National Sales Manager at Beta Bond. And we're looking at some of the financial considerations when buying your first home, given that we've got lower interest rates right now, or perhaps even looking at an additional property and you're looking at how you can best take advantage of lower interest rates right now in building on your current property portfolio. Now, Stephen, what are some of the other considerations? I mean, so the first one that you've said is that you need to essentially be able to assess what you can afford, right? And you're doing that in different ways. We're looking at your income versus your expenditure. So essentially, it becomes quite important for any customer to be able to do a balance sheet, and some of the banks even give you a balance sheet, you're able to find free templates online that are able to help you do a balance sheet. And for you to also see how much money do you have left at the end of the month, are you able to afford a bond installment? Is it significantly higher than what you're currently renting? What are some of the other financial considerations that a prospective new home earners should actually be thinking about when looking at buying a new home? I think a good benchmark to mention is that banks will generally look at up to a maximum of 30% of a buyer's total gross income. Okay, so as an example, if you were to earn $10,000 a month, banks would consider that your repayments cannot exceed on home loan finance to the total of $3,000, and affordability would have to be in place. So if your affordability and your net disposable income after all your expenses have gone through was in excess of $3,000, then you stand a good chance. Now, we've been talking income and expenditure, and we've been talking, and I've mentioned the policy around 30% of your gross income. But one of the other factors that's very, very critical in applying for home loan is that the client has a very, very clear credit bureau. The client needs to ensure that they maintain their credit bureau over a period of time and ensure that they pay their debts on time every single month. And because that's one thing before a bank would even assess the affordability of home loan is to ensure that the buyer that's applying has been able to pay their debts religiously over a period of time. And I mean, when we're looking at your credit score, what's the essential, like what's essentially the range that's relatively good in getting a home loan? Because I know sometimes some people say, if you're on the lower end of a good range, you're more likely to get slightly higher interest rates, whereas when you're slightly on the higher end, then you're more likely to be able to even negotiate with the bank in terms of lowering the interest rate. I think from a credit bureau point of view, I think it also gets very complicated. There is no exact science around what score you're required to have in order to get finance. I think the best that I can give is that if you continue to pay your accounts on time every single month, then you won't be reported or recorded as a slow pay or a bad debt, which the banks will definitely frown upon. And to your point, I think it's also fair to say that if your score is high, you stand a much better chance of securing an approval with a better interest rate than if your score was relatively low, and the banks would then apply some form of risk and that they generally do in the form of a higher interest rate. So you spot on. So if you have handled your accounts on an average or you haven't paid once or twice and your score is low, the chances are that if they do decide to approve your loan, then your interest rates will be high. So best to, if you are thinking of buying is ensure that your retail debt and your financial debt is kept up to date all the time. Now, one of the other things that you always have to think about when buying in your home is of course the deposit, which is quite a substantial amount. Some people say you must have 10% and some people say 20%. What is the importance of having a deposit should somebody even be budgeting for a deposit, especially for their primary residence? So if you're a buyer and you're looking to buy a property, first of all, we'll just take it back step quickly. So you have to ensure that you have a clear credit record. You have to ensure that you have affordability to meet the repayments of the loan. And if you are able to save up a deposit, then that's amazing because the more deposit you're able to provide, the bank's risk then reduces. Risk sits more with the buyer because of the deposit that they put into buying the property. And then your rates are likely to be better with a deposit. And the higher your deposit that you're able to provide, the better rates that you get. And that's not to say that clients can't get 100% bonds. Banks are currently approving 100% bonds. And that would be good. And that would in all likelihood be to buyers that have got a really good credit rating and will consider 100% bonds. The banks will do that. But where buyers, and that's our advice, where buyers have a deposit, it's always best to put down a deposit. And the benchmark I would say for a deposit is anything between 5% to 10% is a starting point. And I mean, you actually look quite great. I remember, I think with the first two properties I bought myself, I initially thought perhaps I'll have challenges with getting 100% bond. And I was able to get 100% bond without needing to put down a deposit. And I suppose there are different factors that then banks look into when granting 100% bond or even a 90% bond without needing a deposit. You know, I'm young, you're working, and they're probably thinking, you're going to be able to pay, you've got a very good credit score. And perhaps if you could just shed a bit of light around some of the different factors that banks look into when granting, whether it's 100% bond or even really lower interest rates. Because I think that's one of the questions that, lot of question marks that people typically have that they're a bit uncertain about what are these different things like, so granted, you're working, and suppose you're servicing your various dates well. But if you put in two applications that are relatively similar, you're still not getting the same interest rate or the one party might be granted 100% and another 90%. So people really want this issue demystified a bit around some of the different factors that banks actually look into before they extend that loan facility to us. Excellent. To answer that question, the first thing that banks would look at is your credit profile. If you have data in your name, and you have been paying it off religiously, and it's been, and it's been for some time that you've been paying it off, then the banks can see that you comfortably have data in your name, whether it's retail or financial debt, you are able to pay it, you are paying it, and that's a good thing. The opposite to that is where we find that buyers do not have any data in their name, so that financial debt currently or no retail debt currently. So the banks would then look back and say, well, if we cannot see that buyers have experienced having debt and have experienced repaying debt, that is where the percentages start to drop in terms of the percentage loan to the purchase price that you apply for that the bank will consider. No credit history is not good having a credit history that is paid up and paid on time and every month is good. And after how long are you able to mitigate something like that, right? Because I think we tend to find, especially with young professionals who, suppose you're a young professional, you didn't take any debts because you're probably just scared of having a store account or credit card, and you now want to start, you know, buying you home and you don't have a credit score. After how long, let's say you go and get a cell phone contract or you sign up for a gym membership, so you try and build up some sort of credit score, after how many months can it be essentially credible that, okay, this is a true reflection of your credit score, and the bank would believe that, okay, this person, we can see that they've got maybe one credit or two things that they're paying off and they've paid it off while in the past three months. And what kind of buffer should somebody essentially give themselves when they're trying to have a good credit score or build a credit score? Well, first of all, the banks, when they look at your credit score, they look at they look at how you've repaid your debt over a period of 12 to 24 months. So I'm not saying you need to have that cell phone contract or that gym contract for 12 to 24 months. My best guess would be that you need to have it for a good three to six months. It would give the bank a good indication of how you've repaid those accounts over the last three to six months. That would be a start, but a lot of buyers believe that they take out a cell phone contract today, they pay it for one month, and then they have a credit rating or a credit history. The longer you have it, the better your chances of getting a higher loan from the bank in terms of percentages to purchase costs. Which is a bit unfortunate, I suppose, for people who want to not have debt, but want to get into the property market. So it's quite an interesting balancing act that you was due because then the type of debt that you'd essentially be taking on in order to build up that credit profile mustn't be back debt, like, you know, taking a store account and then maxing it out or maxing out a credit credit card. If I could just come in there, it is possible to have debt, but good debt. To your point, phone contract is something that's not bad debt. A gym contract isn't necessarily a thing that's bad debt. Having a credit card, but ensuring that it's paid up in full every single month, or having it as a savings facility to save money in, et cetera, is not necessarily bad debt. So we're definitely not encouraging people to go out and take debt on. That's not the intention. The intention is for them to take on debt facilities and just be good payers around it and ensuring that they keep their payments up to date. And I think, you know, before we take in a few questions around this, you know, any other financial factors that we should be considering, because I think, as I think and reflect even on my own property journey, something that we typically don't think about are some of the other costs associated with home ownership. And people typically don't tend to factor those in, whether it's paying levies, if you're going to be living in a complex. What other factors should prospective home buyers be thinking of before they actually go on and embark on that home ownership journey? So first of all, the deposit, if where they can save, it would be great to do a deposit. And then secondly, then you would always have to consider your bond registration and your transfer fees. So as you know, transfer fees are not paid for properties up to 1.5 million. I think that's a figure you can slightly lower than that. I think it was, I think it's 900. Yeah, it's 900, if I remember correctly. So then it was 700, then they got increased, I think it was 2, 900. So if you're buying a property with a net range, you'll likely have no transfer fees payable and you would have bond fees that are payable. So those are additional costs that you would need to consider. But costs around the home, in terms of your levies and water at lots, often people coming out of living with parents or having rented a property, those are the new costs potentially that they would have to consider and that the banks look at when they assess your application. So they consider those things and they build in buffers to ensure that any additional costs that could be incurred on a monthly basis when taking on a new home loan are included in the assessment of the application. So we've got a comment here that says the Bond Origination service seems too good to be true. How come it's for free? It's a very, very good question. So our services to the buyer is absolutely free of charge. We earn an income from the bank based on the deals that we place with them. And yeah, so to the buyer it's completely free of charge. Our income is earned from the bank and we have contracts with the banks and they pay us a commission. And so essentially somebody would never have because I mean online you tend to see quite a lot of stuff. Early in the conversation you were citing that you should be working with the reputable Bond Originator like yourselves a bit of bond. Is there any context where somebody who says they're Bond Originator and perhaps not working for some of the bigger institutions that we know of, would they be charging you? Is there any context where they would actually charge you for that service? So that shouldn't be allowed in no way should it be allowed. The banks are very, very specific on Bond Originators charging onto buyers. And if at any point they feel a buyer is being asked for a fee to originate their bond for them, then they should be in contact with the banks immediately and directly. And what are some of the things that you know people should be looking out for when dealing with a Bond Originator. And by that I mean what are the things that your Bond Originator is basically going to ask you when you deal with them. Because I know I remember the first time that I was working with the Bond Originator I was asked a lot of you know documents and it was a bit not only was it daunting but a part of me was like wait but this is literally my whole life. You can go and create another profile and take all kinds of debt in my name. So there's a part of me that was quite anxious about the prospects of giving so many documents away to a person who's a Bond Originator. And back then I also didn't know much about Bond Originators. So there's a bit of skepticism. Luckily they were referred to me by a very good friend that I trusted was in the property space. So had it not been for sort of that connection there was probably going to be a part of me that was going to be slightly skeptical thinking no no no I'm being asked for so many FICA documents. Is this even are they going to be using my documents legally? Why am I being asked for so many documents? So the list of documents that the bank requires is quite a lengthy list of documents. So we treat each client the dealings that we have with each client and their documents extremely confidential and we have a contract with the bank that enforces us to ensure that we have and apply the strictest rules regarding the confidentiality of the dealings with our buyers and their documents that they provide us. But to your point the list is to some extent some quite exhaustive from bank statements to pay slips you name it. But that's the best way to assess a client in terms of their affordability and those are the documents that the banks require for us to submit on to them. And I must say I mean it's at some point I thought am I going to be asked for you know my blood type and my liver because I was sending so many attachments. So you literally be looking at your your I think it was a three month bank statement you're looking at a pay slip you're looking at your ID then there's a very lengthy form that you fill in that obviously you're filling in all your details but then you're also filling in you know your expenses and listing all the expenses listing how much you know each expense is. So even things like cleaning services so you've got a helper who comes in a room you must be filling that stuff in. So if anything the paperwork to owning a new home is quite exhaustive that so many of us actually don't realize just how administratively heavy it is. And I'm sure so many people at home I mean I know every time I have to fill in those forms I feel as though oh my god like not this again right. So we've got a I've got a question I don't know if you're able to answer this one from Vivian Hoffman who asked why didn't they leave the deep office open for registration which I know so many people would have probably liked to to have open. Yeah so it is disappointing that it wasn't seen as an essential service. Let's hope that President Rima Poser decides given the second two weeks of our lockdown that it is considered an essential service I think for a lot of people within the real estate business it's how they earn their income it's how many attorneys in terms of conveying the income there's bond origination in terms of how we earn our income and if bonds don't register there's no income. So in that decisions will be made in the next few days regarding potentially opening up the deeds office and if not then let's hope and pray we get to the first of May or the fourth of May quicker than quicker than as soon as possible so that we can get the deeds office open and we can start generating some registrations and income for our industry. I mean one thing I know is or it's not even in a matter of fact I think one of the things that we're speculating is that it may potentially we may have more days added on I mean if we keep looking at reports from different parts of the world they're different sentiments so I think one of the things that certainly the property industry and has been citing is that they would have liked the deeds office to be open because then in the event where there are also other people who would have probably wanted to take advantage of the lower interest rates right now then they'd also be able to to do so and perhaps ultimately their their property registered. Now before we wrap up Steven are there any other tips that you'd like to convey to our our listeners and our viewers at home? I'd like to just just to mention the pre-qualification as an ending point I think if there are any buyers or listeners that are looking at buying property um they can definitely contact Better Bond and we'll definitely assist them with a pre-qualification. We will ask for that lengthy set of documents and we will now complete what we have a two-page application not a 10-page application. Oh wow that's incredible. Yeah we have condensed it over the years um but also just bear in mind that when we use it to multiple banks um we need to try and satisfy the bank's requirements and each of the bank's requirements can differ so and that's the supporting document point of view so you took bank statements if I was if I were applying to a buyer's own bank I wouldn't need bank statements but the fact that we're able to apply to other retail banks um then we would require the bank statements in order to get the application to those banks um and if clients are looking at buying and I think now is an ideal time to buy um I think there's a little bit of uncertainty around um what's going on currently in the country with the lockdown etc etc but I think with interest rates where they are now now would be a good time to buy um and if they want pre-qualification if they want that document they can um just log on to our web page. We've got another question here from Gaddejo Park who asks how can one navigate the home loan application process if they are working on a contract basis? So there's nothing wrong with working on a contract basis the banks will consider loans for people that are on contract basis. It depends in what line of profession you are um that that that makes somewhat of a difference and it also depends on the term of your contract and the main term of your contract. Remember the term is over 20 years generally from 20 to 30 years so if you're permanently employed then that money is paid to you monthly but if you're on a contract and that contract extends um over a couple of years then great but if it only extends over a few months and depending on the profession you are in we would have to consider all those points in the instrument application. Okay I'm going to wrap up with you Stephen thank you so much for for joining us this evening I think it's quite insightful um if anything we're doing our best to help each other uh make the best property decisions um during this time and for you at home if you've missed any of our episodes we are uploading them on our youtube channel so you can check out all our previous episodes and of course you can always keep sending your questions and suggestions just below and we'll be in touch. Stephen thank you so much for joining us this evening thank you so much