How can debt consolidation loans help you?

There may be times when you cannot avert your debt. You may have been managing your debt quite well when you are suddenly faced with a situation that requires you to shell out extra cash rather unexpectedly. In the majority of cases, there are two reasons that may cause you to fall behind on payments – (i) medical emergency and (ii) job loss. If you have multiple debts that needs to be addressed and you are finding it difficult to manage these debts, then debt consolidation may be your answer.

Debt consolidation allows you to replace your various debts with a single debt account. You can consolidate your debts with the help of a debt consolidation consultant who will work out a suitable debt consolidation program for you. Debt consolidation loans will allow you to enjoy reduced interest rate and consequently lower your monthly payments. These loans can be of 2 types, namely: secured debt consolidation loans and unsecured debt consolidation loans.

When should you opt for debt consolidation loans?
If you are faced with any one of the following situations, you should attend to your debts without further delay.

1. If you have missed payments for the last 2 to 3 months
2. Creditors have been calling you up for their money
3. You are receiving calls from the collections agencies.
4. You want to enjoy lower interest rate and lower monthly payments
   

Secured versus unsecured debt consolidation loans
If you are planning to take out a secured debt consolidation loan, you will be required to have collateral. The collateral acts as a security against which the loan is taken out on. In most of the cases, your house is used as the collateral. The interest rate attracted by the secured debt consolidation loan is usually less compared to an unsecured debt consolidation loan where you do not use any security and the interest rate is, therefore, much higher.

Secured debt consolidation will allow you to enjoy better rates but should you fall behind on payments, your creditor will take away your home. So, if you are opting for a secured debt consolidation loan, make sure you stay current with your monthly payments.

Article by : Debtcc community member
Website: Debt Consolidation Care

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Cut in Repo Rate

Yesterday, 14 August 2009, the South African Reserve Bank made a surprising announcement regarding the repo rate. The repo rate will be cut by 50 basis points bringing it to 7%. Many economists did not see this cut in the rate coming. They had expected the rate to remain unchanged. Economists had expected this cut to have happened back in June.

On a bond of R500,000, this week's rate cut of 0.5% can give the home owner roughly a monthly saving of about R170. This cut in the repo rate doesn't mean that you should now go out and spend this saving on something else.

The repo rate is also known as the repurchase rate. This is the rate at which the Reserve Bank lends money to other banks.

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Buying a house: The outside of the house – Part 2

The Woodwork and light fixtures

• Check door frames. If it’s metal, check for rusting and if it’s wooden, check for rotting. Also check for gaps between the frame and the wall and also the condition of the wall, e.g. cracks.
• Inspect the window frames on the outside of the house. If has not been looked after, it might just need to be treated. If the frames are badly damaged, it would probably need to be replaced.
• Check to see how many light fixtures are outside. You many need to add extra fittings. Ensure that the light fixtures that are there are in working condition.

The Garage

• If the house has a garage, ensure that you can go in and look. If it’s locked, make sure that the estate agent opens it.
• If the garage is attached to the house and has an inter-leading door into the house, check it thoroughly. The wall between the garage and the house has to adhere to strict building codes.
• Check the condition of the garage door. Is the door remote controlled and does it work? Is the house alarm connected to the garage?

The garden

• Large trees close to a house always makes me a bit nervous. Speak to a professional about the type of tree the house has and what potential damage it could do. Some large trees could damage pipes and the foundation of houses. Ever seen a large tree growing on a pavement and it has destroyed that part of the pavement completely?
• If there is a garden, it will need to be maintained. It might not be the type of garden you like, so think about what enhancements you could do to the garden.
• If the house has a pool, check that it is in working condition. If has dirty water in it, the pump might not be working. There could be cracks in the pool that would need repairing.
• Check the landscape of the garden. If it’s been uncared for, you would need to do quite a bit of work to get it all pretty again. Also, check the condition of the paving.

Security

• What type of outside security does this house offer? Is the front enclosed? Does it have railings or a wooden fence?
• Check the condition of the wooden fence for rotting and weathering. It may just need to be treated or it might need to be replaced.
• If it’s a metal fence, then it should be galvanized to prevent rusting.
• Are the walls high enough (including those between your neighbours)? If there is an open field at the back of your house, you would need to take some additional measures to prevent unauthorized access onto your property.

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Buying a house: The outside of the house – Part 1

When buying a house, one should not only look at the inside of the house but also the outside. Take a walk around the outside and look around and inspect. When you apply for a loan, your bank will sent out their own assessor/building inspector, but it’s always good to do you own inspections.
The Roof

1. Check the roof. Stand back and see if everything looks fine. Do you see any loose or missing tiles. Is the roof dirty (moss growing) and would it need to be cleaned?
2. If the roof line is uneven or sagging, it could be a number of things like: rotting of the beams/frame, the roof is settling (if newly built), termite activity, etc.
3. If the roof is not tiled but has metal sheeting, check for rust.
4. Check the guttering and down pipes for cracks. If it’s metal, check for rust. If it’s plastic, check if it’s broken and if it needs to be replaced. The older type of homes usually have asbestos guttering which might need some screws replaced to prevent leaking.
5. Some people don’t clean their gutters and their might have a little “garden” growing which just needs cleaning out.
6. If the house hasn’t been well cared for, a pit of paint would nicely spruce up the outside of the house.
7. Check the fascia boards as the ends do tend to get damaged from the weather if not cared for properly. Usually minor damage can be repaired but if it’s in a bad condition (rotten), then it would need to be replaced.

The Paint
If a house has been newly painted and is up for sale, I get suspicious and wonder what the owners are trying to hide. There might of course be nothing wrong at all as most people do tend to make their homes a bit nice looking, hoping to get a better price for the house.

The Wall and Brickwork
Check the walls for cracks. Many homes have minor (hairline) cracks to some extent. If there are big cracks, or even little gaps between walls it is advisable to get a professional opinion.

Some people prefer face-brick houses as it’s considered to be less maintenance than having to paint the house every few years (depending on the quality of paint). Face-brick walls has it’s own form of maintenance as it needs to be oiled every few years or so. If the brickwork was not properly cared for, then it could show signs of erosion and would crumble away due to moisture and salt or chemical attacks. If you see any of these signs, get a professional opinion.

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Buying a house: The inside of the house – Part 2

Here are some more things to look for when inspecting a house you like:

1. Check for major cracks in the walls - a freshly painted house might be hiding this (and other faults) so be cautious .
2. Do doors get stuck when opening and closing them. Are the doors damaged? You will be surprised to find that in some homes people actually kick in their doors.
3. Check for leaky roofs – look for watermarks on the ceiling and/or walls.
4. Open windows to see if they get stuck or if window panes are broken. Check the woodwork. Press your finger into the wood. If it is soft, the woodwork was not looked after and it is probably rotten.
5. Check plug points in the house – are there enough – will you need to replace any?
6. Check light switches – you may have to replace some of them
7. Do you like the colour paint on the walls? If not, you will have to repaint it. It is always good to budget for this before going house hunting.
8. Check the condition of the carpet in rooms. Find out how old is the carpet. If there are marks on them, can it be cleaned or does the carpet need to be replaced?
9. Check the light fittings in all the rooms.
10. Does the house have an alarm system? If yes, ask how long ago was it installed. Is it connected to an alarm company?
11. If the house has a wooden floor (usually old houses), jump on it to feel how solid the floor is. Sounds of squeaking is usually not good. If the wooden floor is covered with a carpet, it could be hiding some problems. Ask questions about the floor and inspect it.
12. Are the rooms in the house (bedrooms and other rooms) big enough for your furniture? Ensure that the house has the minimum bedrooms that you require.
13. Is the house structurally sound?
14. Take a torch with you to check behind furniture, fridges and dark corners in the house.

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Buying a house: The inside of the house – Part 1

When going house hunting, it is a very good idea to take a notepad and pen to jot down little notes about the houses you like. You could even take a picture of the house This is part of your research. Old houses as well as new houses can have problems. At first glance, you may not see anything wrong with a house but on closer inspection you might find a few problems.

Some things to look for when inspecting a house you like:

1. Turn on the taps in the kitchen and bathroom and even the shower to check the water pressure.
2. If possible, check the water cylinder or ask the person showing the house some questions. If it’s old or too small , you will probably have to replace it.
3. Check for damp. If the paint on the walls is peeling or has bubbles, a mouldy smell or watermarks; these could be signs of damp problems. Pull back curtains to see if there are any tell-tale signs.
4. Check the bathroom thoroughly for mould. If there is any on the ceiling, painting over it will not solve the problem. The ceiling will need to be replace.
5. Check the shower door – the glass may have to be replace if it’s broken.
6. Check the toilet – ensure that it flushes properly. Check for leaks – i.e. water on the floor.
7. If it’s a double storey house, there should be at least a toilet on each level.
8. In the bathroom and kitchen, check for cracked and loose tiles. Will the grout need to be replaced?
9. Check the bath and toilet for cracks.
10. Check the cupboards in the bathroom and kitchen. Are any of the doors damaged? Would any have to be replaced?
11. Check the sink in the kitchen. If it’s damaged, you will find tell-tale signs in the cupboard under the sink.
12. Will your own appliances be able to fit into the kitchen, or would you need to install new cupboards or make minor renovations?
13. If some of the appliances are being sold with the house, ensure that they are working and that there is no damage to them. If the appliances are old, you are probably going to replace them.

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Buying a house: More things to consider when buying a house.

It is often said that one should buy the smallest house in the nicest neighbourhood that you can afford. The logic behind this is that the house will be the cheapest in the area and you could do your own renovations for cheaper instead of paying extra for a bigger home. In time, the house will appreciate and should you ever decide to sell, you would receive a bigger profit.

When buying a home, what most prospective buyers do not ask themselves is: “How easy will it be to sell this house?”

A highly desirable house will cost you a premium, but you may be able to sell the house quickly, if needed. In our current economic climate, there is an influx of good houses on the market and less competition. The price of houses have come down and foreclosures have gone up, and you may find one of these highly desirable houses for cheaper than normal.

A house on sale with an complete building, e.g. an incomplete granny flat, could hamper the desirability of that house. If you bought a house like that, you’d need additional funds to complete the building which might not be in your budget. You would need to put up with strangers working on your property and the noise that goes along with completing that building; and then there is also the dust and dirt to consider.

Unexpected things can happen and you might need to sell your home very quickly. If you can’t sell your home, then your plans would need to change which might result in a lost opportunity.

I live in an area where houses are usually sold very quickly, but one of my neighbours had much difficulty in trying to sell his home. Last year he had a great opportunity to invest in a business, but this required him to sell his home and move to the northern part of the country. For almost 6 months he tried selling his home through various estate agents, but no sale resulted. He has had to remain living in his home and postpone his business adventure. It’s not the type of house I’d buy for myself.

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Buying a house: Where is the best area to buy a house?

Every potential buyer wonders what would be the best area in which to buy a house. What is best for one person isn’t necessarily best for another. Buying a home will be one of your most expensive purchases you will make, and you will want to know that you are purchasing the right home for you and your family.

Why are you buying a house?
First decide if you are buying a house purely for investment purposes or if you plan on making it your home.

If it’s for an investment, you wont be keeping this place very long. You will need to decide who your target group will be when you eventually sell the place. If you are buying the house to live in, have a look at your current lifestyle and also how you foresee your future lifestyle. How long do you plan on living in your new home? Asking yourself these and other questions will determine if you buy a free standing house, townhouse, an apartment, a place in a security complex, starter home, etc.

You don’t have to buy the place you see or like. The price of the house should not be the only deciding factor when purchasing a house. Do your homework and look at a few houses. It took me two years before I finally bought my house.

The Location and Site
Decide on what areas you’d like to live in. What are you needs? Some factors that may influence your decision would be:

• The distance to your place of work
• Public transportation
• Shops
• The volume of traffic
• The schools in the area or surrounding areas
• Parks in the area
• Crime rate
• Ease of access
• How the house is situated on the plot
• Is the house on a hill and does it have a view?
• Is it near the sea and within walking distance from the beach?
• Is the yard suitable for children, pets, gardening or entertaining

The Neighbourhood
Not only must you like the house, but you should like the neighbourhood too. Drive around the neighbourhood to see what the other homes in the area are like (during the week and on weekends). Things to consider would be:

• Noisy neighbours
• Are the yards of the other homes well maintained – i.e. clean and tidy?
• Are there many pensioners living in the area or are there more younger families?
• The architecture of the houses – do you prefer a more modern house or an older one – e.g. Victorian or Tudor style houses
• Look at the exterior features – a brick home may be easier to maintain
• Security in the neighbourhood

The Size
When buying a home, one needs to be practical. Things to consider:

• The number of bedrooms
• The number of bathrooms
• The size of the kitchen
• A garage
• Grounds for extending the house
• The size of your family
• Do you plan to extend your family?
• Do you plan on working from home?

The bigger the house, the more expensive it will cost to run. You will also pay more in rates and electricity bills will probably be higher than a smaller house. It will also cost more to furnish a bigger house than a smaller one.

Nedbank has a nice tool on their website that will help you get the information on areas you like. It can be found here: area demographics

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Petrol price increases for South Africans

The South African Department of Minerals and Energy has confirmed that the price of petrol will increase by 37 cents – 40 cents per litre from Wednesday, 01 July 2009. For more information, please see the DME.

You can find the South African controlled product price forecast on Shell’s website.

Remember to take into account all these price increases while doing your personal budget when considering buying a new home.

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Repo rate unchanged and Electricity tarriffs increase

The South African Reserve Bank governor, Tito Mboweni, announced today that the repo rate will remain unchanged at 7.5% - i.e. the prime interest rate will remain unchanged at 11%. Economists had expected a rate cut of 50 basis points and were surprised by this announcement.

Eskom had applied for a 34% increase in electricity tariffs. Today, the National Energy Regulator of SA (Nersa) announced that it had given Eskom (state-owned electricity provider) a 31.3% tariff rise for the 2009-2010 financial year.

Eskom supplies about 95% of the country's power has been battling to cover cost increases while embarking on a five-year expansion programme. Later in the year, Eskom will submit another request for a tariff increase that will include a three-year period until the end of March 2012.

Consumers will be hard hit with the tariff hike, but the poor will be affected the most by these increases. Fuel prices are also expected to increase next month.

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How much can I afford to pay for a new home?

It can be a rather daunting and stressful task trying to find a new home when you are unsure how much you can afford. For a single person, the bank will grant you a home loan at a monthly installment of 25% of your gross monthly income, and for a couple it is 30% of their joint gross monthly income.

The normal term of a home loan is 20 years (240 months) but some buyers opt for a longer period, not exceeding 30 years (360 months).

Based on your personal budget, you will be able to see how much monthly disposable income that you will have to spend on buying a new home. Remember to take into account your current and future monthly expenses.

Currently, in South Africa the home loan interest rate is at 11%. If you are unsure whether or not you will opt for a fixed or fluctuating interest rate when you eventually buy your home, I recommend that you increase the loan rate by 2% - 5% when doing your calculations. You will see the benefit of this increased rate in a future article.

The mortgage calculator below will calculate your monthly installments.

Mortgage Calculator

	Loan Amount	R
	Interest Rate	%
	Term of Loan	years
	Number of Payments	months
	Total Monthly Payment (Capital + interest)	R

Your total monthly payment consists of a capital and an interest portion.

Visit your local bank’s website which should have various calculators available for you to use. I quite like Absa and Standard Bank’s maximum home loan affordability calculator of as it takes into account your monthly budget. The bank considers your debt-to-income ratio, which is a comparison of your gross income to housing and non-housing expenses.

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Am I ready to buy a home?

You have decided that now is the time you would like to purchase your own home when prices of houses have dropped due to the current worldwide economic crisis, but are you really ready to buy that dream home now?

Here are some factors to consider before purchasing a home:

Income

Do you have a reliable and steady source of income, namely a job? Have you been employed on a regular basis for at least 2 – 3 years?

Credit Health

A credit check will be done on you once you apply for a home loan. Do you have a good credit record? Do you pay your bills each month and on time?

Finances

What are your finances? To find out, do a budget. The budget will tell you what money is coming in and where it is going. It will tell you what are your needs, wants and can afford.

Other Debt

Do you have any outstanding debt like car payments or personal loans? Now would be a good time to consider debt consolidation. It makes no sense saving up for a deposit (with low interest rates) for a new home when you are being swamped with high interest rates on your current debt.

It would be wise to pay that debt off first, and save yourself money (on interest payments) in the long run. Have a look at your budget. You may have to make some sacrifices and any unnecessary spending will show up in this budget. Use that money towards your debt payments.

Home Affordability

From your budget plan, you will be able to see what money will be available for buying a new home.

You will need to pay a deposit of between 10% – 20% depending on your criteria and the bank that will grant you the loan. In addition to that, you will need to pay home loan costs. The home loan costs are: transfer fees, bond costs and the initiation fee.

It was announced this week that 3 of the top banks in South Africa are now offering 100% home loans.

Once you have bought a home, other costs will be incurred like home insurance, household insurance, security, home improvements, rates, water, electricity, etc.

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