Guiding consumers since 2009

How's your homeloan?

By Staff Writer

As everyone must know by now there is a global financial crisis going on. It started in the US sub-prime homeloan market which was using derived risk tools to sell homeloans on as financial instruments. They just forgot the fundamental law of diversifying risk: you have to diversify across asset classes not through asset classes. This global meltdown has had knock on effects worldwide and South Africa is no exception. The housing market here is falling and expected to continue to do so. Is there anything you can do about it? 

Now is not the time to sell. The market is expected to go down further and the banks are requiring bigger deposits and declining more applications. The National Credit Act has saved us from some of the worst that could have happened here if we were allowed to invest in he now crashed global market as much as we wished. Banks will not just lend to you they are required by law to do their homework and make sure that they are not engaging in risky lending practises. Now if you use a budget planner you will have a much clearer idea of exactly what you have to spend on a homeloan, and the bank will also be creating this data.

With the increase in declined homeloans showing that the banks are doing their due diligence you should too. After you have planned your budget set aside a monthly amount into a savings account, set up a direct payment so you never see that money so never miss it. Then plan over the next two to three years to save up the required deposit. By that time, if there are no more major economic shocks then you should have the deposit for your homeloan, and the market should have properly bottomed out and the economy recovered enough in order for you to buy low and expect the housing market to re-enter the growth cycle. The last growth cycle lasted eight years, the next one won't start for a few years.

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