Real Estate Investor Magazine South Africa November 2013 | Page 25

RESIDENTIAL
even begin house hunting is to establish what
bond you can afford. The National Credit Act
requires lending institutions (banks) to assess
your net surplus income when determining what
loan amount they will offer you. You therefore
need to determine what disposable income you
have and then also bear in mind that the banks
generally will not grant a bond for which your
monthly repayments will be more than 30% of
your gross income.
If you are self-employed, you may face an
even more uphill battle as your income may not
be supported by a regular “pay-check” and you
will then have to provide the bank with more
supporting documents, like bank statements for
up to 12 months, balance sheets for the past two
years, income and expense reports, to prove your
sustainable income to the bank.
The best advice is to establish the information
and supporting documents that will be required
in advance to prepare all such information and
documentation, before you submit an offer to
purchase.

The second requirement: your credit
status
Before qualifying you for a home loan, the banks
will assess your credit history. They will look to see
if you have defaulted on debt in the past and if you
are currently in arrears with any repayments. It is
therefore important to obtain a copy of your credit
record in advance and prior to your application to
the bank to ensure that all information held on
you is both accurate and up to date.
•

Cancel out of date credit and retail cards as
you may not be using them, but they could still
appear on your file, which make lenders wary
about the potential size of your total debt.

•

Build up a track record, banks want to
see that you have a record of managing your
credit sensibly. Also, make sure your income
is deposited monthly into a bank account.

•

Make sure all information you supply is
accurate and truthful as inconsistencies can
have a negative effect on your credit score.
Many credit reports contain outdated and
inaccurate information.

• Always keep proof of paying any arrear debt
and rescind judgments. Make use of credit
rehabilitation service provider to assist you.
www.reimag.co.za

The third requirement: the security
you offer
The bank will consider their loan to the value of
the property. If you have a deposit available, it
means that you also share the risk of the bank
as you are less likely to “walk away” from the
mortgage obligation and loan if you struggle
(in future) to make ends meet. The advice is :
put down a deposit. Statistics show that home
buyers, who are prepared to contribute a deposit
are more likely to have their bonds approved. A
deposit could also result in a more favourable
bond rate, which will save you on interest over
the term of the loan.
If you rely on the income of a spouse –
or investment partner, make sure that the
affordability and credit profile of the co-applicant
is also in line with the requirements of the bank.

Getting assistance to apply for a bond
Using an expert bond originator will give you
the best chance of approval. They will make
simultaneous submissions to all the banks on
your behalf, improving your chances of approval
and getting a better interest rate.
If the one bank declines your application, do
not give up. According to statistics released
by Ooba, the ratio of applications declined by
one bank and granted by another in August
2013 was 28.8 %. It is also held that due to a
proper pre-investigation and administration
process, approximately 70% of all home loan
applications that are received, are approved.
Through an originator you have a single point
of contact throughout the entire process which
cuts down on time and inconvenience for you.
They prepare, motivate and package the
application for you and have an in-depth
knowledge of each bank’s specific requirements
for best chance of approval.
It is advisable to also enquire with your own bank
what services they can offer you, as sometimes a
bank can offer you a different structured package
if you approach the bank directly.

Do you have a less than fantastic credit
record or affordability?
In an article by Linda Ensor, 05 September in
Business Day it was reported that: “The Cabinet
has agreed to a credit amnesty despite the
strong opposition of the banking industry,

which says it will undermine the ability of
credit providers to assess risk.”
At this stage there is no clarity regarding the
precise recommendations that the Cabinet
has approved but it will def initely provide
welcome relief for many potential buyers,
who have previously been unable to obtain
finance. Industry sources speculate that the
amnesty will be implemented before the end
of 2013, but it is already filtered through to the
industry with a negative result as lenders are
now more cautious in lending money, as they
have less credit information to support a new
loan application.

Start early and set a goal for yourself
The bottom line is – get yourself “budget and
credit fit” before you apply for a home loan and
try to save towards a deposit. If you are not
ready right at this moment, start the process
to obtain your own credit report and study the
information.
The credit information from a credit bureau
may not always be comprehensive and it is
advisable to consider a report from a company
such a Credit Health, or Kudough, which
companies provide a combined 3–in–1 report
or a Moneysmart Credit report which provides
an “easy to read” credit report as well as a
comprehensive plan over nine months to assist
you to improve and repair your credit profile
and status.

Improve your affordability
Make sure that your budget can accommodate
your current expenses and trim unnecessary
expenses. Pay off debt as fast as you can. For
every R500.00 that you save and have available
extra per month improves your affordability
with an additional R50 000.00. Make use of
personal finance tools to help you to manage
your budget and keep track of each rand that
you spend. Some of the tools availa ble are
offered by companies such as Moneysmart,
22Seven, ExpenZa, Mobile2budget and tools
and products are also on offer from leading
banks. Plan your budget so you are prepared to
meet the additional payments that you would
be required to pay, once you have taken transfer,
such as rates and taxes and levies.

RESOURCES
Wizard Durbell, My Budget Fitness

November 2013 SA Real Estate Investor

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