 Sure and with that understanding, can you bring it home for somebody who is watching the podcast tonight and wondering what is a mortgage bond and how does it work? Sure. A mortgage bond is really a loan that is secured against the property. Welcome to the Private Property Podcast. My name is Tumi WMJ and as usual, we are bringing you on the past information in the property industry. Thank you so much for joining us tonight and it is a pleasure. If you are seeing my face for the first time, don't worry, don't worry, you are at the right place. It is the podcast here where we are bringing you information that is going to help you make the right decisions in your property portfolio. Today we are going to be talking about mortgage bonds and how to save money. I am sure the moment you heard how to save money, you were like, yes, I am going to listen because that is what we want to help you to do. We want to help you to buy, sell, invest and just manage your portfolio overall and make sure that we are doing the right thing at the right time. So today I have got the co-founder and chief executive of SA Home Loans, Mr. Simon Stockley, to talk to us about mortgage bonds and of course, how to save money. Good evening and how are you, Simon? Good evening. I am very well. Thank you. Thank you for inviting me on your show. Thank you so much for taking our time to talk to us. I am sure a lot of our viewers want to know how to save money in these tough economic times. Everybody wants to know how to save money. So, before we kick off our discussion tonight, just tell us a little bit about yourself and why you are passionate about property. Well, I am a lawyer about profession, a property lawyer about profession, but I haven't practiced law for 30 or 40 years. I was involved in property first of all as a developer. I was involved in borrowing property and fairly large sums of money. And I was subject to mortgage bonds from a borrower's perspective and I counted many pitfalls. Then in the mid-90s, when interest rates kind of peaked at 28%, I came to the startling realization that it wasn't particularly good time to be borrowing money. It should actually be lending money. So with a couple of fellow investors, we founded SA Home Nones, which was the first non-bank lender. And we pioneered the aspect of switching and trying to offer consumers a competitive mortgage bond as opposed to just simply accepting the first price that was quoted. I subsequently sold my estate in SA Home Nones. In fact, the former chief executive of SA Home Nones in about 2005. And I consulted two banks and non-bank lenders in the mortgage space for the last 15 years in places as far afield as Saudi Arabia, Ghana, and Nigeria. So I have a fairly deep and broad understanding of the market. Sure. And with that understanding, can you bring it home for somebody who is watching the podcast tonight and wondering what is a mortgage bond and how does it work? Sure. A mortgage bond is really a loan that is secured against the property. And it is the method used by the vast majority of people to acquire property. Now, I guess the trick or the secret is in approaching lenders or prospective lenders, the overriding consideration is never to take the first offer that you should receive. You should always shop around. You should always compare prices because a small difference in interest rates on the price quoted can amount to a large sum of money over the period of the loan. So it's absolutely vital and absolutely important in acquiring a mortgage to shop around. Let's talk about when one is shopping around. Who am I looking for? Who can register a bond? Who can help me and assist? I heard you talk about banks and SA home loans, which is not really a bank. So how do I go about it? Who am I looking for? Well, there are two methods of essentially acquiring a loan. You can either go directly to your bank or a non-bank lender. You don't necessarily have to go to a bank. The only non-bank lender operating at scale in the market at the moment is SA home loans. Otherwise, the four major commercial banks, you can approach them directly. You should never just approach the one. You should always shop around and submit your bond application to multiple lenders in the hope of levering off competitive rates obtained from those lenders. So that's the primary place to go is just to simply go on the web or walk into a branch and give them all the personal details that are required. Now, obviously, for a first time buyer, that process can be somewhat daunting because the loan agreements are fairly complicated. There's a lot of supporting documentation that the bank will require. So a number of people tend to use mortgage originators. Now, an originator will not cost you any more money. In fact, they can save you money because they are well versed in mortgage practices and they will tailor make or only submit your application to those institutions that are best suited to your particular circumstances. So I would encourage first time home owners to avail themselves of the use of a mortgage broker. They just make sure that the mortgage broker doesn't charge your fee. His fee should be paid by the bank who ultimately grants the loan. So don't commit to any financial implications upfront. Ensure that the fee comes out or is paid from the institution granting the loan. But mortgage brokers can greatly facilitate and hold your hand as a first time buyer. No, I really hear that and there's so many myths because this is a daunting task and it's almost a lifetime commitment. I'm retaking 20, 30 years max from what we hear. So I really would like to know what are the advantages and disadvantages of choosing to have a mortgage bond because then you hear all of these other alternatives that people put on the table myths that come with having a mortgage bond. So from what I would call an expert, what would you say advantages and disadvantages are? Well, as I said, the primary advantage is that a mortgage broker specializes in mortgage bonds and is aware of what's happening in the market. Is aware what types of applications are being considered favorably by institutions. So it is his or her deep knowledge and understanding of the market. As I say, there are some charlatans operating in the industry who attempt to charge a raising fee or an application fee to you as a customer. Avoid those people at all costs. There should be no charge from a mortgage originator from a customer perspective. But approach one of the reputable brokers or originators and let them assist you in the mortgage process. The only time I would recommend not going through a bond originator is if you are privately banked. So if you have a bank manager, you are in the fortunate position of not having to deal with a bank or a non financial institutions call center. If you have the name of a bank manager, then then certainly go directly to them and let them handle the application. But in all circumstances, you should always obtain a second quote or even a third quote for comparative purposes. And when we talk disadvantages, would you say there is a disadvantage in having a mortgage bond? No, of having a mortgage bond or using an originator. No, having the actual bond. Oh, well, I mean, so the important thing to realize is that you're going to pay interest on the loan. I mean, and that interest is going to be calculated over 20 years. And so, you know, when you get when the loan is granted, you'll get a breakdown and you'll see how much interest is charged on the loan. So it is absolutely vital that any excess cash that you have and you pay over and above the installment that is quoted in the mortgage because paying down your mortgage is the most efficient and effective way of saving money. So if you get an annual bonus, for example, and you put some of that money aside into your home loan and you pay down the loan quicker than the scheduled repayment, that can save you an enormous amount of money over the life of the loan. So the disadvantage of having a mortgage loan is simply the interest that you're going to pay over the life of the loan. But it's an, you know, there's nothing you can do about it. I mean, if you can't afford to pay cash for the property, well, then you'll have to take a loan. And that's just one of the effects of life. I mean, it's just the hardship of life. Sure. Thank you so much for that. I'll just be, I'll come back to the questions. I just wanted to look at the social media interaction that we'll be having. Thank you so much to everyone who continuously engages with us. We really, really appreciate it. Drop those green hearts and make sure that we know that you are here. We asked a question where people were, we asked a poll rather where we asked people, would you rather buy a house cash or take out a mortgage? And we got an astonishing 400 comments. I was really, really impressed to see the kind of engagement that we had, you know. Lukman Mokwa says there is a down part to paying a house cash. You might overpay the house where as a bond, with a bond, you will get a proper evaluation and you will not have to overpay. Do you want to chip in here, Simon? There's certainly some merit in that observation. You know, part of the process of granting a mortgage bond is that the banks will send out their valuation department who will submit an evaluation. They won't always disclose that valuation to you. But if they decline the loan, they may indicate that it is because they do not see value in the property. So yes, that is a very valid comment. What of course you can do if you are paying cash is you can pay for a valuation or a professional value yourself to come in and give you a third party appraisal. So yes, that happens automatically when taking a mortgage loan. But it is nothing that precludes you as an individual purchaser from acquiring a third party in the valuation. On the topic of saving money, I think Winston is coming with something really, really interesting because he says one can take out a mortgage, then leverage the same mortgage to buy a second property and just keep repeating the process. Is this a smart way you would say or you believe to start a property portfolio? Well, yes. The advice that I would give is always pay down your primary residence in the first instance. So I mean, I think before investing in stocks and shares, I think there's something deeply entrenched in the South African psyche of owning a home. And I would encourage everybody to pay down their loan and strive to be bond free. But once you're in a position to pay down your loan, then you can take out further mortgages on investment properties and gear up against them. Or you can simply, when once you pay down the loan, take out a portion of the loan. So refinance a portion of the loan to use that as a deposit for a second or a third investment property. But in every instance, I would always encourage people to pay down their loan as the primary residence. Thank you so much for that time. And thank you. And if you just joined us, we are talking mortgage bonds and how to save money. Thank you so much for for engaging with us and sending us your questions. So let's get to the saving money part. You know, what are the key things you would say that if I have a mortgage bond, this is the way I'm going to save money. Or these are maybe the two or three ways that I could save money. Is it buying new developments? Because people say without developments, you don't have transfer costs. And they're all of these conversations that happen offline. So just crystallize it for us to say, how can I save money when I'm when I'm entering? I mean, the first instance is meet your monthly installments. I mean, if you go into areas, you're going to get charged penalty interest. And eventually you run the risk of using your home. You must maintain your your your schedule in the installment at the very, very minimum. As I said earlier on, I would encourage people to pay any excess cash that they have into their bonds to try and reduce the amount of their bond as quickly as possible. Because an extra hundred round a month over and above your your scheduled installment can save you masses of money over the over the life of the loan. So that that's the second thing. The third area in which I would encourage savings is, as I said, shop around. I do not accept the first quote that you get. Get competitive quotes. Compare those quotes. Go back to your preferred financial institution. Disclose them what other quotes you've got and negotiate. And, you know, banks and non-bank lenders like loans, like mortgage loans, because it's a very sticky relationship. You know, it's an investment for 20 years. They like lending on property and they will do everything in their power to facilitate a transaction. But the important thing from a consumer perspective is to shop around and read the small print. And what am I looking for in the small print? What am I looking for? What are those things that you would advise a first time mortgage buyer or someone who's going into a mortgage agreement for the first time to look out for? What is in the small print that I'm looking out for? With the major financial institutions, it's fairly standard documentation. So, you know, you are protected in terms of the Consumer Protection Act. You don't have to be concerned and duty with being ripped off. But where you do need to apply your mind is the installment. So that's the rate of interest that they're charging on the loan. The duration of the loan is that over 20 years, 25 years or 30 years on the size of the deposit that you're required to put down and whatever costs are associated with the loan. So those are the areas where one must apply one's mind. As I say, if you are venturing outside of the major financial institutions and you are perhaps taking a loan or a mortgage loan from a private individual or one of the less well known providers of finance, then check the documentation extremely carefully. Because there is some funnies that can creep in. But with the major financial institutions, if you check the rate of interest you've been charged, the duration of the loan, whatever costs are associated, you're fairly well protected. No, thank you so much. Thank you so much, Simon. We're really gaining so much insight on this. And my next question is something you said, you mentioned this earlier as well. And we're speaking, how does one look out for scams? Because in such a very volatile environment and your mistakes are costly and they could cost you your home, like you said. So the scams are increasing by the day. So how does one protect themselves from potential scammers? The potential scammers are really operating in the origination space. So where people are offering to act as an originator and are undertaking to arrange a loan. So when you hear about arranging fees or origination fees, that's when sort of alarm bells should start ringing. You should not ever pay an originator yourself for arranging a loan. The originators should get paid from the institution granting the loan and it should not affect you as a customer. So if somebody is wanting to charge a fee, just walk away. You don't need those kind of operators assisting you in acquiring mortgage finance. Sure. Thank you so much. I'm a first time buyer, for example, and I'm going into the market. I've got my paperwork set. How long are we talking? Let's talk, turn around times. Let's talk how the needs, my needs analysis. Are they going to ask me for my parents' ID books? What are they going to ask for? The documentation is relatively simple. I mean, they require proof of income. So you have to have, you know, in much the same way that you open an account, a proof of address and, you know, three months, not all than three months, you require an ID document and then details of the property that you are requiring. So the lending process is divided into two component parts. One component part relates to affordability. So that is related to your ability to repay the loan. So you will have to provide some form of substantiating your income. So pay the tax return and if you're self-employed, then you might require financial statements or the like. So you should have these documents ready when you approach the financial institutions. Your ID documents so that they can, you know, establish who you are. And then details of the properties, where the property is and access to the property. So if you bought through an estate agent, I mean, they will arrange access. The process is relatively simple. You know, if all of your documentation is in order, then you should get an approval in principle within a period of 72 hours from the time of submitting. And then a final approval probably within another 72 hours. So, you know, literally within a week provided all documentation is in order within a week. You know, sometimes when it's always seems like a very daunting process and this is why some people are just like, I rather not do this right now. So what are your last words when we're talking to somebody or talking to even some people who want to expand their property portfolio, you know, want to grow it and want to ensure that they acquire more properties. What would your advice be to those to such people? I really believe and I, you know, I'm sorry I'm repeating myself, but I do believe in shopping around, you know, to recognize that it's a competitive landscape that banks are actually actively competing to lend you money and lever off that fact. I mean, the power rests with you as a consumer. And if you choose not to exercise that power and accept the first quote that you get, then you run the risk of paying more than you should. So my overriding advice is shop around, shop around. Sure. Before I let you go, I would want to ask you one question. So what would you do? Would you buy a cash or take a mortgage or is that a trick question? No, I mean, as I say, I mean, for the vast majority of South Africans, I mean, paying cash for a property is simply not an option. But I would always take a mortgage and try to pay it down as quickly as possible in terms of my primary residence. I would then use a mortgage to lever off and exploit the benefits of gearing in respect of secondary and secondary investments. But, you know, for the vast majority of South Africans, taking out a mortgage is just a fact of life. It's, you know, like checks and mortgages and inevitability. I mean, most of us, you know, are not going to get an opportunity when starting out on the property ladder to acquire a property for cash. Cool. Thank you so, so much. So much love from the Private Property Podcast family coming through. They're saying absolutely great insights and they are benefiting so much from the conversation that we are having tonight. So thank you so much. I would ask us a couple of questions, but we would stay here all night. So thank you so much, Simon, for staying with us tonight and really giving us this valuable information. We really do appreciate it. Thank you so much. We have come to the end of today's episode. So, so, so much information to take in such valuable information. Please do ensure that as we are giving you this information, it's something that you practice in your life, because that is the whole reason why we do this, you know, doing so that you keep the comments coming in, you share it with people who you think will need this information. So until the next time we see you, thank you so much for joining us. Have a good one.