Finance
What is a loan to assessed value? (or simply known as “loan to value”)
This is a way of calculating what your monthly repayments will be, based on the assessed value of your home and the amount of your loan.
What loan amount will you be offered?
Your loan amount may never exceed the assessed value of the property you want to buy. So the bank will almost never lend you more than 100% of the value of your property. Example: If you property is worth R500,000 then the bank will normally lend you up to a maximun of R500,000. In some cases banks will lend more than 1o0% to cover legal fees but normally only to first time home owners. Each banks lending policies are different, thats why its always beneficial to shop around.
What % loans will you be offered?
Whatever the size of the loan offered to you, under the National Credit Act (NCA) your monthly repayments may not be more than 30% of your total monthly household income, which means that your total income less your total expenses per month must provide sufficient surplus to meet the proposed installment on your bond. The property must also hold sufficient value to justify the loan.
Calculate the % loan to assessed value?
Formula:
Loan required/assessed value x 100 = % loan to assessed value
For example
If the loan you require is R500 000 and the assessed value is R600 000, the formula is: 500 000 divided by 600 000 multiplied by 100 = 80% loan to value.
In the current market most banks are giving around 90% financing, meaning you will require a 10% deposit. The bank lending policies change according to the financial markets and interest rates. Contact us to find out what the latest loan to values are. Contact us