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Higher bond numbers show banks still bullish on real estate
South Africa - BetterBond
There has been a 4,2% increase in the number of bond approvals over the past 12 months, despite a 2,9% decline in the number of home loan applications.
That's the word from Rudi Botha, CEO of SA's biggest bond originator BetterBond, who says: "This speaks very clearly to the increased appetite that banks have been showing for the home loans market - especially in the R500 000 to R1m price category, which currently accounts for 42,5% of loans granted, compared to 38,7% a year ago.
"What is more, our latest statistics* show that the number of bonds formally granted has also risen (by 3,9%) and that the value of those bonds has increased by almost 11%. This not only shows that the take-up rate of the bonds that have been approved is better than it was 12 months ago, but also that the average size of those bonds is bigger."
Using your bond to finance other things – genius idea or recipe for disaster?
South Africa - Rawson
Your mortgage bond is, almost without exception, the lowest interest loan you’ll ever get, and is often recommended as a cheap way to finance more than just your home. Banks can usually be convinced to extend a mortgage if your home has appreciated in value, but financial experts advise extreme caution when it comes to taking advantage of this option – particularly for expenses that are unrelated to your home.
“Your bond is both the cheapest form of financing there is, and the most expensive,” says Ria Venter , Regional Manager for Rawson Finance, the Rawson Property Group’s in-house bond originator. “Yes, mortgages have lower interest rates than most other types of loans, and if you’re extremely disciplined, they can be viable and cost-effective alternatives to taking out short-term or personal financing. For most people, however, using a bond instead of short-term finance results in paying – and risking – far more than they would have if they’d gone a different route.”
There are several reasons for this, Venter explains, starting with the long-term nature of a bond.