One of the biggest investments that one is ever going to make in life is that in a house. Given the situation of the economy around the globe many people spend most of their lives working to get their dream house. However, given the way financial systems work these days, one way in which one can own a house is through the mortgage system. In South Africa this is generally known as the mortgage bond.
Given this system, many consider a house not just as a major investment but also as a major liability for an individual.
Mortgage and Home Loans - The Basics
The basic system that is working here is that you take a mortgage loan which is going to help you buy a house. For this, the bank or the credit company that is going to give out the loan is going to design a repayment schedule that is going to span between five and twenty years, depending on the situation. During this period it is not just the basic principal amount that you will be paying back, but the added interest as well. The interest amount varies between the different credit companies and banks. The percentage that gets determined is then applied on the amount. This interest is base don the term of the repayment as well.
In case the person starts to fall short on the repayments the lending organizations in South Africa have the right to sell off the house and get their money back. However, in general these are the extreme cases and one can avoid them by getting in touch with the organization in advance and informing them of their financial troubles. Usually, the result is that they work out a rescheduling of the repayments.
The amount of the monthly payment depends on a number of factors. Many a times the lending institutions in South Africa have their own customized rules, but a ceiling is set at 30% of one’s income. With some new regulations, however, the resetting is being directed towards one’s disposable income.
Another key factor that determines the loan amount and the interest is the initial deposit that one submits. A larger amount will put you in a much better negotiating position with regards to the percentage of interest and the size of the payment as well. The type of employment and the income earned from it are also taken into consideration in this process.