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The South African property market: Your 2020 forecast
3 Nov 2020
No Money Down-Property Investor
7 Dec 2020

Your Current House Has Money In It

Published by Darshan on 7 Dec 2020

Your Current House Has Money In It

This blog is meant to awaken you to “where the money is”.

You may feel in despair that you cannot possibly begin a property investment portfolio, your salary and debt repayments are choking your investment dream.

You may be oblivious to the fact that- having paid a mortgage for a few years has given you some access to capital that can be utilised to begin a property investment portfolio.

Whenever we speak about a house being an “asset”- It REALLY is. Here are a few examples of why a house is an asset:

  • You can hide excess savings in a house
  • One can get tax-savings through their mortgage
  • One can save on interest by paying extra on the mortgage.

Having said that- we at SHARE YOUR WEALTH are about educating and enabling you to kick start your property investment portfolio.

I am even tempted to boldly state that: “There is no value in paying off your bond- if you don’t use the equity sitting in of that mortgage”

Here are the various ways you can utilise your existing bond, to begin an investment portfolio

Access Bond:

  • When you have “access” to money in your current mortgage. If you have paid 500 000 on a bond of R1000 000. You can actually access that R500 000 for house improvement (force appreciation on that house, can be resold at a higher value)OR buy an apartment for investment.

Re-Finance:

  •  This is commonly done. . If you have paid 500 000 on a bond of R1000 000. You can re-finance, by withdrawing the R500 000. The bank will register a new R500 000 mortgage, it gets registered at Deeds Office, some legal fees are payable. A new interest rate is calculated. Now you have TWO separate mortgages. You can put down a deposit on another property- collect rent and pay this new bond.
  • In another common transaction. When you have a paid-up mortgage. Or you inherit your parent’s house that has no mortgage. OR you buy an apartment for cash. You can get a Real Estate Professional to help you evaluate the house. You can then ask the bank to “finance” the property- use that cash to buy a new property and grow your portfolio.

Re-advance:

  • When a bank has granted a mortgage of R1 200 000, but you buy a house for R1000 000. After paying R100 000, you can go back and ask the bank to re-advance the loan that is sitting at R900 000 to R1-million, so you can access it to borrow the R100 000. The bank will re-calculate the new loan and new interest. No legal fees required.

Restructure your home loan:

  • You can go to the bank and re-arrange your repayment and even re-negotiate your interest rate. So, you can pay less, and have an extra R500- R1000 for saving towards your investment portfolio

The BLOG-POST is obviously a snapshot of what is possible. For you to take action- you would require to speak to a smart Bond Originator/ Your local municipality office, Real Estate Professional or even a Conveyancer and the mortgage section of the bank. Do not be satisfied with a NO. My experience has been that- most of the above professionals may not be familiar with the terms and will tell you that it is not possible.

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