buying property short term

[Boeta B]

hi,

lets say i buy a newly built flat today @ R650k, and finance it with a homeloan over 20yrs

i live in it and pay the bond for about 5 yrs and decide to sell. only it is now worth R850k and i have a buyer but i do not intend to buy anything else immediately.

how will the bank "settle" what i still owe and and will there be any "change" left for me?

 

[gimpex]

The bank will keep what you still owe on the bond and you get the rest. Actually it won't be the bank but the transferring attorney. They receive 850 and split it as required.

 

[gimpex]

Assuming you pay your monthly payments on time the loan will be less than 650 in 5 years. There are online amortization tools you can use to see how much exactly. Don't forget to factor in the costs.

 

[springbokkie]

With the following assumptions:

Purchase Price: R 650 000
All Cost (bond registration): Paid out of your own account
Interest Rate: 10.5% (prime)
No Deposit
Sell it in 60 months time

You will still owe the bank +- R 576 000, as the first couple of years the installment is made up of mostly interest.

Your profit basically be the increase in the value of the property, if it does appreciate with the 31% you foresee.

 

[Boeta B]

The bank will keep what you still owe on the bond and you get the rest. Actually it won't be the bank but the transferring attorney. They receive 850 and split it as required.

so the bank will basically keep what i still owe for the remaining 15yrs including interest?

 

[gimpex]

No no. They will keep whatever the outstanding bond amount is at te time you sell it. Keeping in mind that each monthly payment is a bit of capital and rest interest the amount will be less than 650. I can do some sums later to give you an estimated figure.

 

[Tman*]

The days of making a quick buck with property is long gone.

Have a look at this, it should shed some light: http://investorchallenge.co.za/the-last-house-ill-ever-own/

 

[SauRoNZA]

Also transfer duties and fees will see you making almost no profit in five years.

Not at those values and not if you didn't overpay the loan.

 

[gimpex]

It all depends. Unless you have a crystal ball , your predictions are just uneducated guesses.

Higher inflation will have a positive effect on prices. Along with many other parameters which could make the decision to buy a property either a very good one or a very bad one.

Plus unless you sleep under a bridge or with parents , there is a cost to that too.

 

[$m@Rt@$$]

so the bank will basically keep what i still owe for the remaining 15yrs including interest?

You only pay the outstanding capital amount and sometimes a small 'interest' penalty.

 

[bassplayer]

You only pay the outstanding capital amount and sometimes a small 'interest' penalty.

Correct. He will also have to pay the agents commission fees.

 

[gimpex]

Correct. He will also have to pay the agents commission fees.

If he sells through an agent

But there will be bond cancelation fees and depending on loan agreement an early settlement penalty

 

[Dolby]

You'd have paid around R22,000 bond registration fees on your R650,000.00 property.

If you sell in 5 years, you'll still owe the bank around R590,000.00, depending on the rate
Property is going up at around 5% currently, so a guess around R830,000 value (you aren't far off)
If you go through an agent, wipe off around R40,000 for their fees
Then depending on sectional, you have things like rates clearance, electrical certification and a *possible* architect drawing

Let's say you walk out R780,000 in the end - they'll automatically settle the R590,000 and you take R190,000.

* Keep in mind you paid R22,000 to register, so effectively R168,000.00
** You can avoid early settlement by giving the bank notice of your intention to sell 3-6 months before transfer

 

[Beachless]

You also need to be aware of capital gains tax if its not your primary residence at the time of selling.

 

[gimpex]

You also need to be aware of capital gains tax if its not your primary residence at the time of selling.

From OP " .... I live in it .... "

 

[ice_cubes]

From OP " .... I live in it .... "

First time sale or repeat sale? remember the exemption only applies to your first sale of your primary residence.

 

[gimpex]

First time sale or repeat sale? remember the exemption only applies to your first sale of your primary residence.

Really ? Didn't know that ... Thought it's every place you live in for two years minimum

 

[DeathStrike]

What if he paid more than repayment amount for that 5 years and hypothetically paid the bond off in that time. Then he would effectively make the full sale amount as profit?

 

[supersunbird]

What if he paid more than repayment amount for that 5 years and hypothetically paid the bond off in that time. Then he would effectively make the full sale amount as profit?

No. The profit would be (sales amount) - (what he put in and sales costs) = profit