Standard Bank Course Summary Document€¦ · This Borrower Education Course Summary Document may...

Dear Standard Bank Client

This Borrower Education Course Summary Document may be used to assist in answering the online multiple-choice questions after each module and/or kept for future reference.

!Course'Summary'Document!

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!!Standard'Bank'Homeowner’s'!!!!!!Borrower&Education&Course!

Course Summary Standard Bank: Borrowers Education

Contents

! Course Introduction 1!1)

1.1! Introduction 1!! Benefits of Homeownership 2!2)

2.1! Introduction 2!2.2! Benefits 2!2.3! Summary 3!

! Roleplayers, Key Terms, Obligations and Relationships 4!3)

3.1! Role-player Map 4!3.2! Obligations of the Bank 4!3.3! The Municipality 6!3.4! Developer / Builder / Contractor 6!3.5! You the Customer 6!3.6! FLISP Subsidy 7!

! Your home buying experience to date and Going Foward 8!4)

4.1! Experience to Date 8!4.2! Offer to Purchase highlights 8!

! Your Mortgage Loan 9!5)

5.1! Definition 9!5.2! Calculation of Amounts 9!

! Your Homeownership Expenses 11!6)

6.1! Introduction 11!6.2! Once-Off Costs 11!6.3! Monthly Expenses 11!

! Insurance 13!7)

7.1! Introduction 13!7.2! Homeowners Insurance 13!7.3! Life Insurance 13!

! Own-Title versus Sectional Title 15!8)

8.1! Introduction 15!8.2! Freehold 15!8.3! Sectional Title 15!

! Contracts & Documents 17!9)

9.1! Introduction 17!9.2! Financing Contracts 17!9.3! Occupation Certificate 17!9.4! Clearance Certificate 17!9.5! Electrical Certificate 17!9.6! Beetle Certificate 17!9.7! Gas Certificate 17!9.8! Plumbing/Water Certificate 18!9.9! FICA 18!9.10!NHBRC Enrolment Certificate 18!9.11!Housing Plan 18!9.12!Documents to Sign 18!


! Making Monthly Payments 19!10)

10.1!How will you pay? 19!10.2!When you will pay? 19!10.3!Will my payment remain the same? 19!10.4!What happens if I pay faster? 20!10.5!What happens if I do not pay? 20!

! Maintenance 21!11)

11.1!Introduction 21!11.2!Maintenance Schedule 21!11.3!Summary 21!

! Budgeting 22!12)

12.1!Introduction 22!12.2!Wants and Needs 22!12.3!Drawing up a Budget 22!12.4!Repairing your Budget 23!12.5!Summary 24!

! Your Rights Protected 25!13)

13.1!Introduction 25!13.2!NCA 25!13.3!CPA 25!13.4!POPI 25!

! Your Will and Testament 25!14)

14.1!Introduction 25!14.2!Definition 26!

! Conquering Credit 27!15)

15.1!Introduction 27!15.2!Credit Management 27!15.3!How to get out of Debt 28!

! Way Forward 30!16)

16.1!Introduction 30!16.2!Signing Documents at the Registering and Transferring Attorneys Office 30!16.3!Payment of Amounts Required 30!16.4!Documents sent to Deeds Office 30!16.5!Registration 30!16.6!Payment Obligations Confirmed 30!16.7!Making Your First Payment 30!16.8!Safekeeping of Documents 30!16.9!Conclusion 31!

! Appendices 32!17)

17.1!Contact Details 32!17.2!Snag List (Happy Letter) 33!17.3!Budget Template. 36!


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COURSE INTRODUCTION 1)

1.1 Introduction

Welcome to the “Standard Bank Borrower’s Education Course” This summary Document provides you the reader with information as provided in the Standard Bank Borrower’s Education online course that you have completed, as well as some additional annexures that you may find useful.

The topics will we cover through the various modules include:

1) Course Introduction

2) Benefits of Homeownership

3) Roleplayers, Key Terms, Obligations and Relationships

4) Your home buying experience to date and Going Foward

5) Your Mortgage Loan

6) Your Homeowner Expenses

7) Insurance

8) Own Title vs. Sectional Title

9) Contracts & Documents

10) Making Monthly Payments

11) Maintenance

12) Your Budget

13) Your Rights Protected

14) Your Will and Testament

15) Managing Your Credit

16) Way Forward

Please note that the amounts and interest rates used and referred to in this document are for illustration purposes only, and that the amounts and interest rates applicable to your contract or situation will be different.


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BENEFITS OF HOMEOWNERSHIP 2)

2.1 Introduction

You would agree that once you know the benefits of completing a certain task or fulfilling a legal obligation, it becomes so much easier to complete that task or fulfil that obligation. It’s no different with purchasing a home. Once you appreciate the benefits, you will no longer see obligations such as repaying your loan or maintaining your home as a burden, but as a route to investing in your and your family’s future!

2.2 Benefits

Benefits of homeownership include:

o Keeping your monthly payments lower in the medium to long term;

o Growing your investment;

o A sense of belonging;

o Stability and security and

o Creating independence and comfort for you and your family.

Let us look at some of these benefits in a littler more detail.

Monthly Payments 2.2.1.

So to start with, let us compare the monthly payments related to two identical homes both in the same area.

The one a rental property, the other a home purchased with a bank loan.

If you rent a property, the monthly rental will normally increase every year. The increases will often be in line with inflation for that period.

A Home Loan Instalment will in the beginning be more than a rental payment and will every now-and-again increase or decrease as interest rates go up and down.

However, in the medium to long-term you will generally be paying far less per month should you purchase a home and not rent.

Now that you know what the advantage is with regards to monthly payments, lets us look at the benefit of a growing investment.

Growing your Investment 2.2.2.

Admittedly, for many the initial loan instalment one has to pay for a home loan will put that monthly budget under pressure. This would be the case especially in the beginning. What needs to be kept in mind is that one of the largest benefits of owning your own home, is that the value of your home will in most instances grow over time.

Property prices over the years have on average shown an increase in the medium to long term.

This allows you to build up what is known as Home Equity. But what does the term Home Equity really mean?

Well as property prices increase the market value of your home will in most instances increase. Market Value is just another way of saying at what price one can expect to sell the house in an open market.

Your loan balance will on the other hand decrease every year as you make regular payments until it reaches zero at the end of the loan term.


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That difference between the Market Value and Outstanding Loan balance, at any point in time, is called “Home Equity Value”.

So put another way, Home Equity Value is simply the amount of money one can potentially make if you sell the house. Lets call it Potential Profit.

You can use this Profit as a deposit for a bigger home if you have a growing family or for any other use.

Now what about other non-financial benefits?

Creating Independence and Comfort for you and your family. 2.2.3.

o Owning your own home will give you the freedom to alter or redesign your home at a later stage.

o You will also be able to decorate and repaint your home in a style that suits you;

o You may even build on additional rooms for your family or to rent out for additional income;

Please however note that your loan agreement will no doubt have a clause that indicates that you cannot make alterations that will decrease the value of your home.

There are of course other Personal Benefits.

o Perhaps you are ready to settle down in your community, and want the feeling of permanence and involvement that comes with owning your own home; and finally

o A home of your own also provides a place of comfort for you and your family and gives you the flexibility to adapt your living space to individual tastes and needs.

2.3 Summary

Let us now summarize.

We have shown that homeownership:

o Provides for a lower and more stable payment over the medium to long term when compared to a similar rental unit;

o That it allows you build up Home Equity Value (Potential Profit) over time; and

o Provides a place of comfort that can be altered to suit your needs.

I am sure you will find additional advantages over the next few years.


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ROLEPLAYERS, KEY TERMS, OBLIGATIONS AND RELATIONSHIPS 3)

3.1 Role-player Map

This section highlights some of the role-players and key terms used in this document.

o A Sales or Estate agent is the person that provides the buyer with all the information relating to a development or home and will assist in finalizing the offer-to-purchase.

o The Seller would be the person, company or developer who is the registered owner of the property that you are buying.

o The Buyer is the person buying a property together with any co-purchaser where applicable. In this case you would be the buyer together with the co-purchaser where relevant.

o The Offer-to-Purchase is a written contract between the seller and the buyer recording the terms and conditions of the sale of the property. This is also called a Deed of Sale, or Sale Agreement.

o The Lender is the institution, or bank, that provides you with a housing loan. In your case Standard Bank is the lender. The lender may also be called a Credit Provider.

o The Loan-Originator is in certain cases the link between the Buyer, Developer and Lender and assists buyers in completing a loan application for approval by the bank.

o The Developer is the person or company that builds your home according to approved quality standards.

o The Loan Agreement, which is also referred to as the Mortgage Loan Agreement, is a written agreement between the lender and the borrower (that being you) that stipulates all the terms and conditions linked to a housing loan.

o There are two attorneys involved when purchasing a home:

• The Transferring Attorney transfers the Title of the property (in other words your home), from the sellers name into your name at the Deeds Office by means of a Transfer of Title The Title Deed is the legal document that states that you own the property

• The Registering Attorney registers the Home Loan in favour of the lender or bank, at the Deeds Office. The Registering attorney will also arrange for the signature of all documents needed to finalise the Loan. Note one attorney can perform both functions if need be!

o The Deeds Offices are government offices under the control of a Registrar of Deeds, where ownership and other rights to property are registered or noted by way of Title Deeds.

Ok, now that we have defined some of the key terms let’s provide some further detail.

3.2 Obligations of the Bank

The bank, as a lender, has certain responsibilities. In terms of both the National Credit Act (or NCA) and the Consumer Protection Act (or CPA). Let us consider the most important of these responsibilities:

Checking Affordability 3.2.1.

o When you apply for a loan from the bank, the bank must look at your financial situation and assess your ability to repay the loan. Put another way, the bank needs to consider the issue of “Affordability”. This to make sure you will not be over-indebted once you have to repay the loan. Over indebted simply means your necessary expenses are larger than your available income.

o If the loan agreement will result in you becoming over-indebted, the National Credit Act states that the lender, or bank in this case, will be guilty of reckless lending.

o A word of caution! The bank will review your credit worthiness through a credit bureau, but you will be responsible for supplying the bank with accurate information relating to your:


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• Income; • Monthly expenses; and • Marital Status.

o If you fail provide the correct information regarding any aspect of your personal information, the bank will not be guilty of reckless lending, and you will bear the unfortunate consequence of having to repay your loan and maybe even lose your home.

Providing you with a Grant Letter. 3.2.2.

The bank needs to give you a Grant Letter before you sign the loan agreement that highlights:

o The total loan amount of the Mortgage Loan;

o The loan initiation fee;

o The required deposit if applicable;

o The total amount repayable;

o The interest rate applicable when you sign the loan;

o The monthly admin or service fee;

o The total monthly instalment you have to repay;

o The due date of your first instalment;

o The term of the loan. “Term” is just another way of saying over how many months you will repay the loan; and

o Any other relevant amounts, terms and conditions in a clear and understandable manner.

Some of these terms will be explained in more detail later in this course.

Note the Grant Letter will only contain some of the most important amounts, terms and conditions of your Home or Building loan agreement. The Home Loan Agreement or Building Loan Agreement will however contain all amounts terms and conditions.

Assessing Property Value 3.2.3.

As part of the loan approval process the bank would have assessed the property you want to buy. This to confirm that there is enough collateral for the loan you need. Now you might say: What is collateral?

Basically the bank is asking itself, if you do not repay the loan will the bank get their money back by repossessing the house and selling it on the open market? Collateral may also be referred to as security.

Please note that this valuation process does not make the bank responsible for checking if there are any defects to the house! That responsibility remains yours.

Other Services 3.2.4.

In addition the banks will:

o Draw up the loan agreements and allocate attorneys to attend to the registration of your property;

o Offer insurance (both credit life cover and home owners insurance) to protect you and your family; and

o Also offer you other products such as:


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• A transactional account to pay your salary/wages into; • A Credit Card; • A personal loan; • Student loans; • Vehicle finance; and • Drawing up a Will and Testament.

3.3 The Municipality

The Municipality’s or Local Authority’s role in the housing process is

o To enforce proper building regulations and town planning, and supply water, electricity and sanitation services amongst other things;

o They will also issue a rates clearance certificate when an existing property is being transferred from a seller to a buyer.

o Two critical things to note about your relationship with the Municipality:

• You must ensure that the Seller has paid up his municipal account in full; and • You must pay your Rates & Taxes every month!

3.4 Developer / Builder / Contractor

Now when we when we refer to the "builder" it may mean "the builder, contractor or developer". The following is critical to note with Building Loans or where buying a complete home from a builder.

o Make sure that the builder is registered with the National Home Builders Registration Council, or as we normally refer to, the NHBRC.

o The builder would have added an amount of 1,3% to the selling price of the house that he paid the NHBRC.

o If you detect any structural problems (serious cracks, sagging foundations, leaking roofs etc.), first report it to the Builder and if he does not help within a reasonable period, then report it to the NHBRC. Follow up regularly and insist that they address the issue.

o We will supply contact details at the end of this course

With regards to defects, note that the builder is responsible for ensuring that there are no problems or defects with the house!

To ensure you are not taken advantage of, follow these steps when taking possession of your new home from a builder:

o One. Make sure that when you take possession of the keys you inspect the home for any problems related to the construction or finishing of the house (these are also known as snags); and

o Two. Note these snags on the Snag List, Letter of Satisfaction or Happy Letter that both you and the builder sign. Do not accept a verbal promise, no matter how helpful the builder seems! The Summary Document available at the end of this course provides some tips as to how to properly snag a house.

Please be aware, it is not the bank’s responsibility to ensure that defects are repaired. The contract is between you and the builder and not between the builder and the bank. The bank is therefore not responsible for any defects or problems with the house, and you cannot use this as a reason to not make loan repayments to the bank.

3.5 You the Customer

Now what about your obligations as the borrower?

Well you will:


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o Pay the Bank every month the minimum amount due.

o Pay the monthly electricity, rates and taxes due to the Municipality;

o Look after your property and maintain it so that it keeps its value; and

o Importantly, inform the bank of any change relating to your income, expenses or marital status that may influence your ability to meet your payment obligations.

3.6 FLISP Subsidy

FLISP stands for Financed Linked Individual Subsidy Programme. It is a subsidy linked to the Government that assists qualifying households by providing a once off down payment to those household who have secured mortgage finance to aquire residential property for the first time.

The objective of the programme is to:

o Reduce the initial mortgage loan amount;

o Render the monthly loan repayment instalments affordable over the loan payment term and thus increase access to home ownership.

FLISP will assist qualifying households to:

o Acquire ownership of an existing residential property;

o Obtain vacant serviced residential stands which are linked to house-building contracts with home builders registered with the National Home Builders Registration Council (NHBRC); or

o Build a new house with the assistance of a homebuilder registered with the NHBRC, on a serviced residential stand, that is already owned by the beneficiary.

The criteria to qualify for FLISP are basically as follows. It is targeted to households:

o Whose monthly household income ranges between R3 501 and R15 000,

o Who are South African; and

o Where the maximum loan/purchase price has to be R300,000 or below.


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YOUR HOME BUYING EXPERIENCE TO DATE AND GOING FOWARD 4)

4.1 Experience to Date

While you are looking forward to moving into your new home, it will help if we look back at the process to date and highlight aspects that you perhaps need to double-check.

Let’s first review what’s happened to date.

o The first step you would most likely have taken was to calculate how much more-or-less you could afford as a monthly payment on a loan.

o The next step was visiting show houses offered for sale by developers, or existing homeowners and choosing a home that you liked, and can afford!

o The next step was to put in an offer-to-purchase, with all the terms and conditions included therein.

o Once the seller accepted, you and the seller both signed the offer-to-purchase.

o You then put in a home loan application through the bank, or by way of an independent home-loan originator, where you provided the personal and financial information requested.

o The next step on your journey was to receive notification that your home loan or Building Loan has been approved, or declined, after taking into account your income, affordability, credit standing and the property valuation on the home you selected.

o You then received your Grant Letter. Having received the Grant Letter, it is required of you to check all key amounts terms & conditions included therein.

o You would then have gone to the Registering Attorneys office.

4.2 Offer to Purchase highlights

I would like to highlight some aspects of the offer-to-purchase that I would like you to check again. Just to be sure that there are no unexpected surprises, go over the following.

o The purchase price and description of the property.

o The date you will take occupation.

o The Occupational-Rent amount. This is the amount that you have to pay on a monthly basis where you take occupation of the home before the property is registered in your name at the Deeds Office. Only thereafter will you begin to repay your loan. Note that the occupational rental period may vary. Please make sure that you budget for the occupational rent amount.

o Check whether the offer-to-purchase guarantees you vacant occupation of the home. You do not want to arrive with your removal truck, and find tenants of the previous owner unaware that they have to move out. Do not sign any documents with the attorney unless you are sure occupation is guaranteed.

o Also check if the offer to purchase gave the seller permission to remove any fixtures such as curtain rails, air conditioners, built in cupboards etc. The seller is not allowed to remove any items considered a fixture if nothing is mentioned in the offer-to-purchase.

o The offer to purchase will also note how long you have to arrange your finance.

o And, importantly, check that the seller has made a declaration, in the offer to purchase, that there are no structural or other serious problems with the home that he or she is aware of.


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YOUR MORTGAGE LOAN 5)

5.1 Definition

Let’s start by defining exactly what a Mortgage Loan is. It is simply a loan from a financial institution or bank, secured by some form of collateral. In your case your home will be the collateral or put another way, it will serve as security for the bank.

Once you have purchased the home the Transferring attorney will submit documents to the Deeds Office that transfers the Title Deed from sellers name into your name. At the same time the Registering Attorney will register a Mortgage over the property in favour of your bank at the Deeds Office. This simply tells the Registrar of Deeds that while you own the property you will not be able to sell and transfer the property into someone else’s name without repaying the loan in full, from a portion of the sale proceeds.

The Mortgage Loan is thus a contract between the lender (in this case Standard Bank) and the borrower (namely you), which details the terms and conditions related to the amount lent to you, and what you will be repaying on a monthly basis.

The amount loaned is called the Capital Amount, the monthly payment is called the Monthly Instalment.

5.2 Calculation of Amounts

How are these amounts calculated?

Well the Capital Amount is the total amount of money that you have borrowed from the bank and is made up of the Selling Price of the house, less any deposit that you might put down.

If you qualified for a government subsidy (Such as FLISP) or once-off employer grant, the amount you qualified for, will also be subtracted from the selling price.

In certain cases an initiation fee may be charged. This amount is usually added to the Capital Amount.

Unless transfer duties and other legal fees are either paid upfront to the Attorneys, or it is already included in your Selling Price, it is added to the Capital Amount.

The Capital Amount is also commonly referred to as the Loan Amount.

Now let's look at how the Monthly Instalment is made up!

The first part is the Capital portion. This is the portion that comes off your outstanding Loan Balance on a monthly basis.

The Interest Portion is the fee charged by a lender to a borrower for the use of borrowed money. The interest is calculated by applying your interest rate percentage against the outstanding loan balance.

So just to be sure we are all on the same page! This Interest and Capital Portion is what is termed “the Monthly Instalment”.

In addition, a monthly service fee is charged for maintaining and administering your Loan Account. This is also referred to as an administration fee.

Unless you are ceding an existing Life Assurance policy, you will be asked to take out Life Insurance.

If so, you will have to pay a monthly Life Insurance premium over the life of the loan.


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A homeowner’s insurance premium that covers any damage to the structure of your home, will also be charged unless you stay in a Sectional Title unit, in which case it will be included in your levy.

So the Monthly Instalment plus all the other payments you will make to the Bank is termed the “Total Monthly Payment”.

It must be noted that in the beginning, the Interest Portion of the monthly instalment will be high. This is because your interest is charged on the outstanding loan balance in the beginning, which in the first few years will still be high.

The Capital Portion of your monthly instalment will therefore initially be fairly small.

So it’s key that you remember this important fact that is often not shared by lenders. Only the capital portion of your Total Monthly Payment will be deducted from the loan balance every month.

Because of the capital portion being smaller in the beginning, your loan balance will in the first few years decrease slowly.

If you are meeting all your payments, the monthly interest portion will, over time, become smaller, and the capital portion larger. After a number of years, your loan balance will decrease at a much faster pace!


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YOUR HOMEOWNERSHIP EXPENSES 6)

6.1 Introduction

We noted earlier that there are significant benefits related to homeownership, but there are also obligations.

Being a homeowner results in some additional expenditure that you will have to provide for in your monthly budget.

This chapter will highlight expenses associated with Home Ownership and help you prepare for that critical first year, which I have to admit, can be challenging!

6.2 Once-Off Costs

Let us first consider Once-off Costs that might have an upfront cash impact for you when purchasing your home.

o You may be required to pay a deposit on your new home. This amount, if payable, will be noted on your Grant Letter;

o Municipal Connections fees. Ask your estate agent or the developer for contact details of your local authority to find out how much you have to pay;

o Attorneys Loan Registration Fees;

o Attorneys Transfer Fees;

o Occupational Interest;

o Transfer Duty Costs. There is normally no Transfer Duty on a new home purchased from a Developer; and

o Removal fees for your furniture and other goods!

In certain cases, some of these costs will be included in the purchase price of your home, and thus be included in the loan that Standard Bank has approved.

If you have opted for a jumpstart loan, Transfer and Registration costs are included in the loan. You will not pay these costs to the Transfer and Registration Attorneys.

6.3 Monthly Expenses

The first monthly expense will be the Total Monthly Payment to the bank. This will include:

o The monthly Loan Instalment. That being, as discussed earlier, the capital and interest payable.

o The monthly Service Fee; and

o Life and or Homeowners Insurance (This if you have opted to take insurance with the bank and not taken out your own).

o Municipal Rate and Service Fees. This you pay for services related to refuse removal, street lighting, repairing roads in your area and other services provided by your municipality.

o Water & Electricity costs are also paid to the Municipality and are based on how much you use;

• Please note that should you not pay your municipal account, the municipality may attach your property and sell it.

• The municipality have the legal authority, after following certain legal steps, to effectively take ownership of your home, have you and your family evicted and sell it to recover any amounts owed.

o There are also Maintenance Costs;

o Levy Costs, if staying in a Sectional Title Development and


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o Gardening Costs, where you are staying in a home with a garden.

Remember that meeting these obligations will contribute to you and your family enjoying your home, prevent it from being repossessed and as maximize its value!

Now please remember, just as with most other costs such as petrol and food, your Total Monthly Payment might change over time.

Let’s have a look:

o Your Monthly Instalment might go up or down based on your Interest Rate increasing or decreasing.

o Municipal Rates, service fees and other costs will normally increase every year with inflation.

Planning for these costs will ensure that you do not run into financial difficulties.


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INSURANCE 7)

7.1 Introduction

For most of us a home is the most valuable asset we own and we would like to protect it for both our own and our family’s benefit.

This is where insurance steps in.

There are essentially three types of insurance you should have in place. Two are compulsory if you are taking a Standard Bank Home or Building Loan.

7.2 Homeowners Insurance

This first type of Insurance is Homeowners Insurance, which may also be referred to as homeowner’s cover.

o This insurance provides cover for any damage to the structure of your home caused by:

• Fire; • Lightning; • Explosions; • Storms, wind, water, hail; • Earthquakes; • Impact from animals, trees, aerials, satellite dishes or vehicles • Faulty geysers; and • Theft. Note, only the damage to your house caused by violent entry will be covered.

o This insurance is compulsory;

o In terms of the National Credit Act, you may take out your own insurance and cede this to your bank.

o Standard Bank can provide this type of insurance, in which case it will be included in your Total Monthly Payment; or you can take out your own and provide Standard Bank with proof that you have done so.

o Please note that your Home Owners Insurance does not cover the contents of your home and your personal possessions for damage or theft.

o Also note that should you claim for any damage you will normally have to pay an amount out of your own pocket called the Excess Payment.

How much will you pay? 7.2.1.

How much will you pay for homeowner’s insurance? Standard Bank or your own Insurers will provide details as to the various policy options available and what the cost will be, but note that the amount you will generally pay per month depends on the value of your home.

7.3 Life Insurance

Introduction 7.3.1.

There is unfortunately the risk that you might pass away or become permanently disabled while you still have an outstanding balance on your Loan. In most cases you will not want to leave your family with the burden of paying the balance owed on your loan. This is where Life Insurance provides you with peace of mind.

Key Facts 7.3.2.

o Life insurance will pay out upon your passing away or if you become permanently disabled.


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o If your life insurance is a “Credit Life” type of policy, it will provide cover to settle the outstanding Mortgage Loan Balance only. Other Life Assurance policies may provide for a payout larger than the outstanding Mortgage Loan Balance.

o Life Insurance is compulsory;

o In terms of the National Credit Act, you may take out your own insurance and cede this to your bank.

Standard Bank can provide this type of insurance, in which case it will be included in your total Monthly Payment or you can take out your own and cede the policy to Standard Bank.

o Please however note. Should you not accept Standard Bank’s Life Insurance option, the policy you take and cede to Standard Bank must:

• Have sufficient cover. Put another way it must always pay out enough to cover the outstanding Mortgage Loan Balance at any point in time;

• Provide cover for death and permanent disability; • Not have exclusions. An example would be that if the policy says no payout will be made

if you die of a heart attack, Standard Bank will not accept the policy; and • Match the loan term. So if you have a twenty-year loan term, your life insurance policy

must be for at least 20 years.

How much will you pay? 7.3.3.

Standard Bank or your own Life Insurers will provide details as to the various policy options available and what the cost will be, but note that:

The amount you will generally pay per month depends on three factors: these being:

o Your age;

o Your health; and

o The amount of cover required. The amount of cover is just another way of saying what the maximum payout may be.


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OWN-TITLE VERSUS SECTIONAL TITLE 8)

8.1 Introduction

Essentially when you buy a house, townhouse or flat, you will either buy it on a Freehold basis or on a Sectional Title basis.

What are the key characteristics of both?

8.2 Freehold

Well, with Freehold ownership, (also known as Own Title) you have ownership rights to the actual land, home, garden, walls and any other structure on the property. A carport is maybe a good example. As the owner, you are responsible for the maintenance of the whole property and will have to pay:

o Rates & taxes;

o Homeowner’s Insurance; and

o Municipal Service Fees for the whole property every month.

8.3 Sectional Title

Introduction 8.3.1.

With a Sectional Title property, you are buying into a type of "Communal Ownership", where you will only have exclusive ownership rights to your apartment or townhouse

o The apartment or townhouse is referred to as a "Section" in your sale contract.

o You will have shared use of certain other parts of the property. These are called "common property areas”, and may include the:

• Driveway; • Garden; • Swimming Pool; • Corridors; • Lifts; • Outer walls; • Foundations; and • The Roof

o There may also be exclusive use areas. This is a part of the property which you do not

have ownership rights to, but over which you alone have exclusive use, and may include:

• A portion of the garden; • Your patio; and • Your parking bay.

If Unsure ask your Estate Agent or the Attorney to show you where in your contract these different sections are noted.

Who Manages the Sectional Title Development 8.3.2.

A Body Corporate governs the common property and related finances. All the owners make up the Body Corporate. Does this not create chaos you may ask, if everyone makes decisions regarding the Sectional Title Development? Yes it would, which is why you the owners in a Sectional Title


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Development elect Trustees to run the Body Corporate, often with the help of outside administrators. The Trustees are accountable to all the owners and owners will be asked to vote on annual budgets and other important issues such as where changes to house rules are being asked for.

While on the subject of House rules. It is best that you ask the estate agent or seller for a copy of the house rules before you move in! It will cover a range of subjects relating to pets, parking and other rules that basically helps all to remain good neighbours!

What is a Levy? 8.3.3.

All Sectional Title unit owners pay monthly levies. The levies are used to cover costs related to common shared areas such as:

o Gardens;

o Driveways;

o Pavements; and

o Swimming pools;

The levies also cover:

o Body-corporate management-fees and

o Rates and taxes of the common property areas. But note that the rates and taxes covered by your levy are for the Common Property areas only.

If in a Sectional Title Development, you will have to pay the Rates and Taxes for your Section of the Buildings.

How much do you pay? 8.3.4.

How much do you pay? The best person to check with is the Developer or the Estate Agent, but the short answer is this:

o All the costs related to the common areas and the administration of the full development is added up and divided amongst all the owners.

o The larger units in Sectional Title Development will always pay a bit more than the smaller units.

Levies will increase annually with inflation.


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CONTRACTS & DOCUMENTS 9)

9.1 Introduction

It helps to have knowledge of various documents. Some you would want to keep copies of these for your peace-of-mind and to protect you legally. Let’s explore which these are.

9.2 Financing Contracts

When buying a home you will be entering one of two possible financing contracts.

If you are buying an existing home from a private seller, or a completed home from a builder or developer, you will be entering into a Home Loan Agreement with Standard Bank.

If, however, you are having a builder or developer build you a home, you will be signing a Building Loan Agreement with Standard Bank.

Note that both agreements are a classed as a Mortgage Loan Agreements.

9.3 Occupation Certificate

An Occupancy or Occupation Certificate is a document that is issued by the Local Authority in accordance with the National Building Regulations. It basically says that your newly built home has been completed in accordance with the approved building plan and all other Municipal requirements. Make sure this has been issued before moving in!

9.4 Clearance Certificate

When a property is changing ownership, the transferring attorney (normally appointed by the seller) will need to apply to the Local Authority for a Rates Clearance Certificate. The clearance figure is normally six months of advance Rates & Services Payments on the seller’s account.

Only once the amount is paid in full, will the Local Authority give the transferring attorney the clearance certificate. Without the clearance certificate the transfer will be rejected by the Registrar of Deeds and this will prolong the change of ownership.

9.5 Electrical Certificate

An Electrical Certificate of Compliance is required before the Local Authority will connect the electricity supply for a new owner. Normally this certificate is obtained by the seller and passed to the purchaser and it remains valid for as long as there are no additions or changes to the electrical installation at the property.

9.6 Beetle Certificate

Beetles can infest the timbers of your house, especially the roof trusses. A beetle infestation certificate, guarantees the absence of beetles from the property. Many such certificates only cover certain types of beetle, so it is wise to ensure that your certificate covers all types.

9.7 Gas Certificate

The gas certificate has been introduced for safety reasons. Gas leaks can be very dangerous and expensive to repair. These must be issued by an authorised gas dealer.


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9.8 Plumbing/Water Certificate

Water leaks, as well as causing damage to the property, are a waste of a valuable resource. The plumbing/water certificate, which guarantees that plumbing works in the property comply with the correct standards, is another certificate required when selling or buying property. It must be issued by a registered plumber.

NOTE: Whenever work is carried out to make changes to electrical, plumbing or gas installations, you should obtain a certificate detailing the work carried out, to ensure the job complies with regulations; otherwise you might have trouble selling your home.

When buying, check that the certificates have been issued by a reputable company with qualified employees. If you are not sure, buy yourself some peace of mind and pay an inspector of your choice. It could save you tens to hundreds of thousands of later!!!

9.9 FICA

FICA stands for Financial Intelligence Centre Act. In terms of this act the bank must verify that you are, who you say you are. Unless you are already a Standard Bank customer you will have to sign documents and provide the following prior to finalising your loan.

o A certified copy of your green, bar-coded Identity Book (your ID) or a valid passport if you are a foreign national, as proof of who you are.

o Proof of where you live in the form of an original utility bill that is less than 3 months old, in your name and with your residential address clearly visible on the bill (an Eskom account, rates account, water account or Telkom account is usually good enough for these purposes. If you rent your current home, a signed lease agreement is usually acceptable).

o An IRP5 form or another document from SARS to verify your tax number.

9.10 NHBRC Enrolment Certificate

Check that the builder has enrolled with the NHBRC and that an enrolment certificate has been issued for your home.

9.11 Housing Plan

Ask for a copy of your housing plans with the Local Authority’s stamp of approval.

9.12 Documents to Sign

The documents you will need to have available, or sign, will differ depending on whether it is a Home or Building Loan Agreement. The lists below will be made available to you after the completion of this course.

o A Power of Attorney;

o Marital Status Declaration;

o Authority to pay; (note that by signing the authority pay document you give the bank authority disburse funds to the attorneys)

o Personal affidavit;

o FICA documentation;

o Insurance quotations or cession of Life Insurance;

o Confirmation of income and expenditure;

o Sectional Title documents (where relevant);

o Building Loan Documents (where relevant); and

o A Salary Stop Order and / or Debit Order.


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MAKING MONTHLY PAYMENTS 10)

10.1 How will you pay?

By now you would already be aware that it is critical to pay your Total Monthly Payments to the bank on time and every month.

How will you go about doing so?

Two methods basically:

o A monthly Debit Order that will deduct the amount owed directly from your bank account; or

o A Salary Stop Order where your employer will pay the amount directly to the bank by deducting the amount payable from your monthly salary.

Even if the Salary Stop Order is used, you may still have to sign a debit order, which will be in place until your employer has loaded the Stop Order onto the company’s payroll system or it may even be used should you resign and your new employer does not load a salary stop order.

10.2 When you will pay?

From a cash planning point view, knowing when you have to pay what, is essential!

Home Loan 10.2.1.

With a Home Loan Agreement the following will most likely occur.

o If you have moved into the home before Transfer-of-Title and Mortgage Loan registration occurs at the Deeds Office, you will pay Occupational Interest. We have used 3 months as an example in the diagram.

o The Total Monthly Payment Due in terms of your Home Loan Agreement is due 30 days after the property is registered in your name at the deeds office.

Building Loan 10.2.2.

With a Building Loan it works slightly differently.

o Life insurance is activated the day the Mortgage Loan is registered in your name at the Deeds Office

o You will be charged interest as soon as the Property is registered into your name at the Deeds Office, and the first payment is made by the bank for land or construction of the house.

o You will become responsible for Homeowners Insurance the day you are given occupation. This is essentially when you are given the keys to a complete unit and told you can move in.

o With a Building Loan Agreement your first instalment is due within 30 days after 90% of the agreed loan has been paid to the Builder, or on occupation.

10.3 Will my payment remain the same?

You might be wondering will my Total Monthly Payment remain the same? The short answer is: no!

But first, just as a reminder; remember that the Total Monthly Payment is made up of:

o The Monthly Instalment (that being your interest and capital payments);

o The monthly Service Fee; and


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o Life and or Homeowners Insurance (This if you have opted to take insurance with the bank and not taken out your own)

As noted earlier, the Monthly Instalment part of your payment, that part related to your Mortgage Bond, might go up or down based on your Interest Rate increasing or decreasing.

Municipal Rates, service fees and other cost increases may also cause your Total Monthly Payment to increase, as these costs are impacted by inflation.

10.4 What happens if I pay faster?

Now let us consider what happens to your loan balance if you pay amounts over and above your loan instalment. And we can only encourage you do this, given the benefits you will now be shown.

By increasing your regular monthly instalments by even small amounts you will repay your loan earlier and that you will save interest. The more you pay extra the quicker you will repay your loan and you will save additional interest.

The most convenient way for you to make extra payments is by adjusting your salary stop order or your bank debit order.

You can also make once off extra cash payments when you get paid a bonus or receive other additional income.

Please remember that even if you pay more than you have to per month, it does not mean you can pay less the next month.

10.5 What happens if I do not pay?

Unplanned circumstances might arise where you cannot afford to repay your Mortgage Loan.

If this is the case, your very first and best course of action must be to approach Standard Bank to make alternative payment arrangements.

If this is not done the process followed by Standard Bank in this case will be as follows.

o Standard Bank will inform you that the instalment due has not been received.

o You will be given the option to approach a Debt Counsellor. But please note this process may take a number of months and you might be falling further in arrears during this period.

o You will need to contact Standard Bank’s Customer Debt Management Department to make arrangements to rectify the situation if you have not already done so.

o Please note that should you fail to respond, or properly address the non-payment, and your account remains in arrears, Standard Bank will hand your account to lawyers. Your house could be repossessed and sold or auctioned to someone else.

o The money received by such a sale will be used to repay your loan balance.

o Standard Bank may opt to sell the house for less than you owe, and after your home is repossessed you might still find yourself owing Standard Bank money.

o So the bottom line is that you must make every effort to keep up to date, and if there is a problem, approach Standard Bank as soon as you foresee a problem. There are steps that can be taken that will minimise the chance that you will lose your home! I cannot repeat this often enough. See Standard Bank as your financing partner and approach them as soon as possible if you have difficulties in meeting your payment obligations!


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MAINTENANCE 11)

11.1 Introduction

Spending a little money every few months on required maintenance will prevent very expensive repairs later on. You can thus view this sometimes-inconvenient expenditure, as a future saving. For example, if wooden windows are not treated every few years, water damage could cause mould and rot. Next thing you know, you are looking at a very high repair cost, instead of spending a small amount on wood sealer. In addition proper maintenance:

o Will contribute to your home looking good;

o Ensures a safe environment for you and your family;

o Will go a long way towards ensuring that your Homeowners Insurance claims are accepted; and

o Will help your home retain its value

11.2 Maintenance Schedule

So how do you go about maintaining your home? It is a good idea to have a home maintenance file in which you will keep any receipts of home repairs, upgrades or regular maintenance for your house. This can be a powerful tool when it comes to selling your home. This way, the buyer knows you have taken good care of your property.

For your home to be well maintained and cared for, there are a number of things you need to monitor on an on-going basis. A Checklist highlighting the key items will be provided at the end of this course as part of the Course Summary Document. It is important to note that where legislation requires maintenance work to be carried out by a specialist like an electrician, do not attempt to perform the repairs or maintenance yourself.

11.3 Summary

o The moral of the story is that spending a little bit of time and money each year on home repairs and maintenance will help you save money in the long run, and increase the value of your home.

o Use a checklist to ensure you cover important maintenance items.

o Repair broken items timeously to prevent larger expenses later.

o Use professional assistance where legislation requires it, or where you need assistance


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BUDGETING 12)

12.1 Introduction

This module details how one best goes about putting together a budget that will help you make the most of your hard earned money.

Most simply put, a household budget is setting out your total expected monthly household income and then deciding how you will spend and save your money. Note the really important phrase we used ... “deciding how you will spend and save your money”.

John Maxwell says it in an even simpler manner, “A budget is telling your money where to go instead of wondering where it went.”

But much like building a home that will last; your budget needs a solid foundation. This foundation is obtained by understanding your needs, reviewing your current expenditure and then setting clear and achievable goals that you will work towards, over time.

If it is your intention to make your goals a reality, then applying the following practical steps and tips will assist you.

12.2 Wants and Needs

Putting together a proper budget starts with understanding what your real needs are and what the things are that you actually just want.

If you first spend all or some of your hard earned income on “Wants”, and then the balance of your Income on Needs, you will often find your needs are not covered by your Income. This could mean critical payments such as your child's schooling or your housing instalment are not being paid.

If, however, you first look after your Needs and only then consider your Wants, you will find a much healthier looking budget where everything fits, your financial goals are being achieved, and very importantly, where you do not need to take out expensive short term loans to cover pressing needs.

12.3 Drawing up a Budget

Now how to go about drawing up a monthly household budget?

Well the key word is household. If for example you share household expenses with your spouse or partner, it is so much more effective to prepare a joint household budget. Each person would list their contribution to the budget in separate columns.

o First list your monthly income.

• Take care that you do not include overtime, unless it is regular and even then only include half of it, just be sure you do not overestimate your income.

• What about your annual or performance bonus ... we would like to set a challenge for you! Do not include your annual bonus in your monthly budget as income you will spend. Rather put it in a savings or investment account, or maybe pay off some of your debt.

o Now on the expenditure side, draw up a budget that assumes you are paying cash for everything! You heard right, just consider not taking out any new debt going forward. Even if you think you must use your credit card after that minimum payment has been made, try drawing up a budget that assumes you only have cash. A tough ask, but think of the future rewards!

o List your essential expenditure items first. We will provide a budget template for download at the end of this course with all these items listed.


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o Next, list how much you want to save for your retirement, your children’s education or other long-term goals.

• Basically pay yourself first. But be realistic. If you have not been saving to date, start with a small amount and increase the amount as your financial situation improves!

o Now list those expenditure items that are considered essential in terms of what you need to cover every month as highlighted now.

o We will provide a budget template at the end of this course as part of the Course Summary Document.

o Check your bank statement and receipt slips to list accurate amounts relating to the items on your budget.

• Housing Loan or Rental Costs; • Municipal Rates and Service Fees; • Transportation expenses for work; • Medical Aid; • School Fees; • Life insurance; • Home-Owners Insurance; • Union dues; • Food; • Bank Charges; • Home Maintenance • The total of all your minimum monthly account payments; • Clothing; and • Cell-phone and other communication costs;

o Now list the items that are not essential as now shown.

• Donations; • TV Subscriptions; • Hobbies or Sport Matches; • Entertainment; • Savings for Holidays, Back to School Costs etc.; and • Restaurant & Take Away costs;

o Now lets relook at your debt obligations. First list all your clothing, furniture, loans or credit card accounts and set out how much you would like to pay extra on any one the accounts listed in order to bring down the amounts owed.

o Do not forget to also save for those once-off costs related to back-to-school costs if you have children, medical bills or car servicing as an example.

12.4 Repairing your Budget

You might say, “How can I begin to save when I am hardly covering my income?”

You are unlikely to cut your expenditure in one or two months. Changing your spending pattern will take time and a lot of effort.

But just like a snowball gathers more snow the further it rolls down the hill, each change you make to your budget will add to your monthly savings, and all the small savings combined will eventually have the dramatic impact needed.

Ok here are some pointers.

o Pack your own lunch. Less take-aways can save you a fair amount per month!


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o Change your banking package to a cheaper option. You can save a lot in monthly bank charges. Ask Standard Bank for the best option for your circumstances.

o If you are traveling alone to work, join a lift club. Sure, you are forced to leave and return from work at specific times, but is convenience or saving the priority right now?

o Apply the thirty-day rule! When you think you need an expensive item, wait 30 days and then ask, “Do I really need it?" You might find that you really don't!

o Restaurants can be great, but why not rather invite friends round and eat at home! When your friends apply the same approach, eating out will be more social and much cheaper.

o Consider cooking double or triple portions when you have time and freeze the extra portions. This way you avoid expensive take-aways for those evenings when you are running late or when you "simply do not feel like cooking".

o The Gym Membership Consider cancelling, or not renewing your membership and rather exercise by walking or running.

o Pay cash for medical bills at your doctor or dentist. They will generally give you a cash discount. You will have to submit the account yourself, but your medical aid cover will no doubt stretch for longer, and the savings will keep on ticking up.

o The cell-phone can talk away your income quite efficiently as that monthly debit order rocks your bank account. Consider going to pre-paid. The per-minute rate might be a bit higher but you kind-of think twice whether you need to make that call or send a Whatsapp instead.

o With vehicle insurance, insurance companies will always only pay out the market value of your car. Your car's value decreases every year. Contact your insurance broker and reduce the amount of cover to match your cars value.

o One key item has not been mentioned. Your Short Term Debt! As soon as you have additional money available in your monthly budget, pay off your short-term debt. You will be saving on interest, admin fees and credit insurance.

So as you can see swopping bad habits for good habits, and being disciplined when spending can lead to savings and the realization of your goals. You will no doubt have other excellent saving tips. Please email us suggestions in the email box on your screen, so that we can include these in future course updates.

12.5 Summary

Draw up your own monthly household budget. It is provided as part of the this Course Summary Document. And oh yes, never, never let those spending temptations destroy your future goals!


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YOUR RIGHTS PROTECTED 13)

13.1 Introduction

So what legislation protects you as a current or future homeowner?

The following acts provide you with a measure of protection.

o The National Credit Act; Please note it will in most instances be referred to as the “NCA”;

o The Consumer Protection Act; This act it will in most instances be referred to as the “CPA”; and

o The Protection of Private Information Act, also referred to as POPI

13.2 NCA

With regards to the National Credit Act, the following points are especially relevant.

o It seeks to promote fair and non-discriminatory access to credit;

o In terms of the Act, the Credit provider must assess lenders ability to repay the loan, consider their credit profile and give reasons if the loan is declined; and

o Importantly, the consumer must provide complete and truthful information to ensure protection in terms of the National Credit Act.

We would like to emphasize that you must always provide complete and accurate information to a lender, including Standard Bank, and ask for information in your home language if you need to!

Please also ensure that you always update, Standard Bank with your latest and most relevant information.

13.3 CPA

With regards to the Consumer Protection Act the following is important.

o The CPA aims to restrict unwanted direct marketing; and

o Emphasises a customer’s right to a cooling off period after direct marketing.

13.4 POPI

With the Protection of Private Information Act, the following highlights are relevant:

o The Protection of Personal Information Act aims to protect the right to privacy of personal information.

o Companies and Institutions will not be able to share your personal information with any third party without your consent.

YOUR WILL AND TESTAMENT 14)

14.1 Introduction

During your lifetime you will acquire various possessions such as a car, and a home. You may also have savings in a bank account. These possessions and amounts of money are called your assets. You will also acquire some liabilities. This occurs when you have bought things such as furniture or a home but still owe money for it, or where you have taken a loan that has to be repaid. This module will detail how a Will can assist your family to benefit from your remaining assets when you pass away.


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14.2 Definition

A Will is a document that you draw up while you are still alive to indicate which family or friends will benefit from any payout from your estate.

Your Will also states who will be responsible for making sure your Estate is administered.

If you leave no instructions on how to distribute your assets after your death, it can cause conflict amongst members of your family. Your assets could end up going to a person who may not necessarily have been your choice, or your children could be left without a home.

When should you make a Will? If you possess any assets, you should make a Will.

This is to make sure that your Estate is distributed according to your wishes and instructions. Bear in mind that your Will should also be updated regularly to take into account any changes in your Estate.


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CONQUERING CREDIT 15)

15.1 Introduction

I would like you to think about whether you would answer yes or no to the following questions.

o Would you like to pay many thousands of Rands over the next few years for goods that you will only own for a few days or a few months?

o Would you like worry about those month-end bills?

o Would you perhaps like to acquire a bad credit report?

o Do you want your car taken back or have your home repossessed? or

o Have you ever thought: I never need to save for my children’s education?

Anyone answered yes to any one of these questions? Thought not.

Managing your credit allows you to avoid all the scenarios we have just noted, and over time puts more of your money back in your pocket.

With over 7 million people in South Africa in arrears with one or more of their accounts, you will agree many are not managing their credit.

Lets have a look at the typical route through which many people becoming over-indebted.

15.2 Credit Management

You will agree that where your income covers all your expenses you will have a “balanced budget”, with no monthly shortfall.

But what if you decide that despite not having enough money, you are going to spend that extra bit on that weekend-party with your friends. You will spend less next month you say. You apply for a loan of R1000 and it’s approved on the same day. This is convenient!

Of course the interest and admin fees are added at the end of the month.

Month two arrives and those cuts in your spending don’t quite work out. You now have a cash shortfall in your budget as you pay back the R1000 principle debt as well as the interest and admin fees of R100!

But guess what, as soon as you pay back the loan the lender offers you another loan, and upps your credit limit to R2000. “Great, I can to cover my shortfall!” you note and get that new cell phone I wanted.

“I will just take out a new loan every month to cover my shortfall until things improve; and the loan company sure is eager to lend” you say.

Month three arrives, and you pay back the R2000 principle debt amount, as well as the interest and admin fees of R150. “No improvement in my spending”, you think. Buy hey! the lender again offers you another loan and upps your credit limit to R5000.

That weekend in Durban is on!

Month four arrives and you pay back the R5000 principle debt amount, as well as the interest and admin fees of R300, the lender offers you another loan, but this time there’s no increase in your credit limit.

You take it nonetheless as you now desperately need to fill up that gap in your budget!

Month five arrives, and yes you are forced to do the same!


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This payment cycle will in many cases continue on a month-by-month basis with the cycle of borrowing and repaying repeating itself.

Have you noticed how you keep on paying that R300 interest and admin fee?

These R300 payments build up quickly and over a period of 5 years you will end up paying R8,000 in interest and admin payments.

Except for now plugging a whole in your normal budget, the best you will have been left with is a long forgotten party, an old cell phone and photos from that holiday.

There is of course the risk that these on-going payments can lead to:

o Other account payments being missed;

o A poor Credit Report;

o In certain cases your car being repossessed by the vehicle financing company; and

o You and your family being evicted from your home.

So how do you conquer your credit then?

15.3 How to get out of Debt

Introduction 15.3.1.

If you, like many other South Africans have accumulated a large amount of debt with various retailers and lenders, it most likely did not happen overnight. This Debt Monster grew over time as you borrowed on that new or increased credit limit. Here are steps that will guarantee getting out of debt.

Step 1: Stop feeding the Monster. 15.3.2.

If you want to get out of debt, you have to stop feeding that debt monster. Destroy your cards, lock them away, do whatever it takes to break the temptation of using them. You have to stop bleeding cash before you can begin to work on the debt. Where you have to plug a shortfall using a revolving finance loan, do so sparingly and only for absolute necessities.

Step 2: Live your budget. 15.3.3.

o With a budget, you know where your money is coming from, where it’s going, and you have the ability to control it.

o Each time you want to purchase something ask yourself is it in my budget?

Step 3: Look for ways to improve your cash flow. 15.3.4.

o If you want to improve your cash flow, there are only two ways to do it:

• Earn more; or • Spend Less and spend less

Earning more is often outside of ones control, but one can control spending. Look at the saving tips we discussed in the Budget Module and apply those that can bring down your spending.

Remember make the tough choices now and reap the reward of reaching your future goals!

You’ll probably have to give up many things you like. You may even need to sell some things. Getting into debt is easy, getting out of debt, not easy at all. But the benefits are worth the effort!

Over the next few months you should see that your available income is larger than your necessary expenses. What to do with this extra income?


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o The first key action is to create an “emergency fund”.

o The second key action is to reduce as much your outstanding debt as possible.

Step 4: Get a basic emergency fund. 15.3.5.

o As you create extra monthly cash flow, try and save some of that extra cash flow and build up an emergency fund of R5000. Why do we say save before you have even paid off all your debt? The simple answer is so you don’t have to borrow again when emergencies pop up. And they will pop up! Washing machines break, cars need repairs, kids need braces, and so on. It’s a fact of life.

o Perhaps you can use your annual bonus or tax refund to make a really big dent in that debt.

Step 5: Begin the debt snowball 15.3.6.

o List your debts, from the smallest balance to the largest, including the amounts owed and the minimum required payments.

o Pay minimum payments on all of your debts except for the smallest one. Then, you need to attack that one with what Dave Ramsey calls “gazelle intensity!” In short, this is the intensity a gazelle has, when a cheetah is chasing him!

• He’s focused; • He’s determined, and • He’ll use all his might and wits to succeed.

o In short, every extra rand you can get your hands on should be thrown at that smallest debt until it is gone.

o What you would achieve:

• Not only can you have the satisfaction of having one less account; but

• You also save the service fee and in some instances the insurance fees linked to that account.

o Once the first debt is paid off, attack the next smallest one. Use the amount you are currently paying off and the instalment saved on the first settled account to pay off the second account on your list. And so you continue! Every time you pay a debt off, you add its old minimum payment to that repayment war chest of yours!

o Just as the snowball swallows up more snow as it rolls, your debt will get swallowed up in a financial avalanche.

At this stage you can start to relax, but not so much that your goals are forgotten.

Step 6: Keeping the income to expense gap. 15.3.7.

o Now remember extra essential expenses will challenge your ability to consistently attack you debt, so:

• Consider selling some of your stuff to get some short term big wins; and

• Re-evaluate your budget to find additional savings!

Step 7: Max up your emergency fund. 15.3.8.

o This is where you have left that cheetah behind and you are safely in the 4x4. Once the credit card and consumer debts are paid, start saving six months worth of living expenses.

o This is a fully funded emergency fund and should help you survive all but the worst financial emergencies. Best of all, it will keep you out of debt in the future.


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WAY FORWARD 16)

16.1 Introduction

This last module will provide you with a good idea of what the next steps will be, and highlight key actions on your part.

16.2 Signing Documents at the Registering and Transferring Attorneys Office

You will be contacted to sign all the necessary documents at the registering and transferring attorneys’ offices.

16.3 Payment of Amounts Required

If your transfer and bond registration cost are not included in your Mortgage Loan, the fees must be paid in full at the different attorneys before the bond can be registered in your name. Please check with Standard Bank if costs are included in your Mortgage Loan if you are unsure.

If a deposit is to be paid, check to whom you must pay this amount and if you are paid interest on this Deposit amount until registration takes place.

Also check to whom you must pay occupational interest.

16.4 Documents sent to Deeds Office

Once all documents are in order and all fees have been paid in full, the attorneys will submit the documents to the Deeds Office. This process of delivering the documents to the Deeds Office is known as “Lodgement”. Lodgement does not mean that it has been registered in your name, only that that it has been received by the Deeds Office.

16.5 Registration

When the Deeds Office has checked all the documents for correctness, the transaction will be registered.

This process normally takes about ten working days from when the documents were lodged with the Deeds Office but can take up to 3 months.

16.6 Payment Obligations Confirmed

Standard Bank will send you a letter to confirm that your bond has been registered and what your instalments will be.

16.7 Making Your First Payment

The Total Monthly Payment in terms of your Home Loan Agreement is due 30 days after the property is registered in your name.

With a Building Loan Agreement your first instalment is due within 30 days after 90% of the agreed Loan or Capital amount has been paid to the Builder, or on occupation.

16.8 Safekeeping of Documents

The Attorney will send copies of the Title Deed and Mortgage Loan Registration documents to Standard Bank for safekeeping.


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16.9 Conclusion

That brings us to the end of this course.

You will now be given access to a number of documents by proceeding to the next section after answering the questions below.

We trust you will benefit from the information presented in this course and that your homeownership journey is a happy and prosperous one.


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APPENDICES 17)

17.1 Contact Details

Type of Enquiry Contact Number

General enquiries 0860 123 001

Application forms (new and further loans) 0860 123 001

Property information service 0860 123 001

Short-term insurance - Sales and quotations - Service 0860 123 474 0860 123 741

Home Loan Protection Plan 0860 123 911

Home owner’s insurance - Service - Claims 0860 121 141 0860 123 444

Customer debt management (if you are having financial difficulty and want to discuss options with us)

0860 102 270

Properties in possession – Marketing 0860 103 869


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17.2 Snag List (Happy Letter)

You may use this snag list to assist you in identifying and notifying the developer (builder) of any aspect of your newly built home that is not to your satisfaction. If the developer (builder) provides his own snag list and it does not have a category for the type of defect you have identified, please make sure you write the defect under an “other” category, or anywhere on the document the developer has provided. Do not sign any document without listing all the defects you have identified.

HOME INSPECTION CHECKLIST – INSIDE THE HOUSE

Checked (√)

Comments

WALLS:

What is the quality of the paint job? Are there any areas that still need to be painted or that need a ‘touch up’?

Do you notice any dampness or mould?

Are there any visible structural cracks (cracks through or deep into the wall)? Are there any visible plaster cracks? (Plaster cracks are part of normal foundation settling can be addressed with a coat of paint later. Plaster cracks are not the contractor’s responsibility)

CEILING:

Are there any visible cracks in the ceiling?

What is the condition of the ceiling? Do you see any mould?

WINDOWS AND LOCKS:

Are all locks working?

Do all windows open and close properly?

Are there any cracks in the windows?

FIXTURES AND FITTINGS:

Are the fixtures and fittings in line with specifications?

Are they fitted correctly?

HOME INSPECTION CHECKLIST – INSIDE THE HOUSE

Checked (√)

Comments

TILES:

Do you notice any cracks?


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Has the grouting been done properly?

Has the silicon sealing around baths, basins etc. been done properly?

PLUMBING:

Do the toilets work properly?

Do all taps open and close properly?

Is there any leaking water visible around taps?

Are there any unusual noises or malfunctions when you open and close the taps?

Are taps fitted correctly i.e. not loose?

Does water flow out of baths and basins properly?

Does water flow out of all taps simultaneously when they are all on?

CUPBOARDS:

Do the cupboards open and close properly?

Are the doors hung correctly (straight, tight)?

ELECTRICAL:

Do all the lights work properly?

Are all plug points/sockets working?

Do the switches on the electrical board work?

APPLIANCES:

If any appliances like the stove etc. are included, are they in good condition?

OTHER:

P.T.O for items outside the house


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HOME INSPECTION CHECKLIST – OUTSIDE THE HOUSE

Checked (√)

Comments

CONCRETE AND BRICKWORK:

Are any bricks lifting or uneven on the driveway or walkways?

ROOF:

Are there any cracked or broken roof tiles?

Are any tiles missing?

DRAINS:

Do you notice any over-flowing or blocked drains?

Are there any cracked pipes?

DRAINAGE:

Does the drainage appear good and is it away from the house?

Are there any ‘hollows’/areas where water could become trapped?

LEAKS AND DAMPNESS:

Do you notice any signs of leakage?

Is there any evidence of any dampness or mould?

WALLS:

Do you notice any evidence of dampness or mould?

Are there any visible structural cracks (cracks through the wall) or plaster cracks?

OTHER:


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17.3 Budget Template.

Please use this template or the excel version (if you chose to download it), as a base for preparing your monthly household budget.

You may edit the excel version should you so wish.


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