Home loan FAQ Guide 

– The Finance Linked Individual Subsidy Programme (FLISP) programme is a housing subsidy for first-time home buyers to assist with purchasing a home.

The programme is open to a household where the income is between R3 501 to R22 000 per month. Applicants that meet the qualifying criteria can you the subsidy to purchase their first home.

This subsidy can be used to :

• Buy an existing house / apartment.
• Buy a serviced residential site (i.e. plot with access to basic services)
• Build a house on serviced residential site, if the site was not acquired through a government housing subsidy in the past. Your builder must be registered with the National Home Builders Registration Council (NHBRC) to ensure building and safety standards.

– FLISP requirements include being a South African citizen and having income within a certain range.

• FLISP subsidies are available for first time home buyers who earn between R3 501 – R22 000 per month.
• The home loan of the buyer must first be approved and the buyer must be a South African citizen and be married, co-habiting or single with a dependent.
• The new buyer must never have benefitted from a similar subsidy before; e.g. an RDP house.
• Home buyers who recently took transfer and meet the qualifying criteria can also apply.

You will require the following documents along with your FLISP application form:

Certified copies of identity documents (IDs).

Certified copies of dependents’ birth certificates.

Certified copy of marriage certificate/ Final order of divorce.

Original recent payslip/affidavit confirming unemployment/ proof of social grant.

Certified copy of the deed of sale / offer to purchase.

Certified copy of the bond approval / bond quotation.

Original/ certified copy of the statement of transfer cost from transferring attorney.

The application process usually takes 7 days.

– If you meet all the requirements, you can apply for a government subsidy, but you must first apply for home loan

You used to have to apply for a home loan and have the application approved before you could apply for FLISP, but as of April 2022, this is no longer necessary. You can now use other sources of finance to apply, including:

• The beneficiary’s pension/provident fund loan.

• A co-operative or community-based savings scheme, i.e. stokvel.
• The Government Employees Housing Scheme.
• Any other Employer-Assisted Housing Scheme.
• Certified copy of the deed of sale.
• An unsecured loan.
• An Instalment Sale Agreement or Rent-to-own Agreement.
• You can then discuss an application with your financial institution, contact the nearest municipality for advice, or submit an application form at the Department of Human Settlements.

 – A home loan that has not been approved does not mean the end of your property journey – it simply means that you will need to assess why it was declined and make the adjustments in order to be approved the next time you apply.

Don’t immediately reapply

Avoid the urge to immediately reapply for a home loan with a different bank or lender. Too many applications for credit could very well be the reason why you have been rejected in the first place.

Instead, talk to your bank or lender to find out what the reason was for the rejection. Not only will you avoid the trap of too many applications, but you will also have a clearer picture of what to do to get your home loan approved.

Poor credit score

This is very common problem with applicants that might not be aware of the importance of a healthy credit score.

When banks assess whether to approve a home loan, their first step is to check your credit score.

If your credit score is rated poor – below 600, you should get a copy of your credit report from the credit bureau. The first thing you should do is check that your report doesn’t have any errors.

If you identify errors on your credit report, the credit bureau should be notified of these and you should then take the necessary action to rectify the information displayed on the report. This will entail engaging with the credit provider who has provided the credit bureau with incorrect data.

If the information is correct and your poor credit score is the result of an impaired credit record due to bad debts or having no credit history whatsoever, further action will need to be taken.

Ways to improve your credit score:

• If your poor credit score is due to a lack of credit history (meaning you have no record of being able to pay back loans or credit) you should begin by opening small retail accounts or cell phone contract.
• If you have a low credit score due to an impaired credit record, you will need to try and settle your debt as quickly as possible.
• Pay your bills on time.
• Settle and close accounts.
• Pay more than the minimum instalments on existing debts.
• Avoid applying for additional credit over this period.

If you’re applying for a home loan alongside a partner or are married in community of property, then your partner will need to follow the same steps.

Work with a professional

Work alongside a trusted home loan expert  before you start the home loan journey. They will be able to help you not only apply for a home loan but can offer a pre-qualification certificate, and help you understand your credit score and help with credit rehabilitation if needed.

– Guarantees are typically required when you’re buying a property. The seller needs some kind of guarantee that you’ll be able to afford the property. The simplest way to do that is to provide bond approval documentation or hand over a hefty deposit if you plan on paying in cash

– Signing surety means taking responsibility for repaying a home loan if a bond-holder defaults for any reason. It’s quite common for parents to sign surety for a purchase made by their child. What many people don’t realise, however, is that unless you specifically limit your surety to a certain percentage, you’ll be responsible for the full outstanding amount of the bond.

– RTI stands for “Repayment to Income” and refers to the percentage of your gross income that will go towards your bond repayments. The legislated maximum RTI is 30%, which means the highest bond repayment that anyone can qualify for is 30% of their monthly income, before expenses.

– People often get confused between equity in a bond and equity in a property. Equity in a bond is the amount of additional money you’ve put in, above and beyond your minimum repayments. This can be withdrawn if you have an access facility. Equity in a property, however, is the amount by which your home’s value has increased since your loan was granted. If this amount is significant, you could potentially convince your bank to increase your bond accordingly.

– Here is a lowdown of everything you need to know about interest rates:

Personal interest rate

A personal interest rate is as unique as a home and the individual who buys it. It is determined using a number of criteria and is based on the client’s risk profile. The interest rate is one of the key costs to consider when comparing home loans.

Prime lending rate, prime minus, and prime plus

The prime lending rate is effectively the starting point that banks use to calculate interest rates for clients. It covers the bank’s basic profit margin, which is then set higher or lower based on the applicant’s risk profile. A riskier individual would get an above-prime loan, which would be at prime plus, for example, prime plus 1%. A low-risk client could get prime or lower, for example, prime minus 1%.

What determines interest rates?

The prime lending rate is a marked-up version of the repo rate. The repo rate is the interest rate commercial banks pay to borrow money from the Reserve Bank. By raising or lowering the repo rate, the Reserve Bank makes it more or less expensive for commercial banks to borrow money. This, in turn, affects how affordable they can lend money to consumers and this determines the prime lending rate.

The repo rate changes according to the economic climate. Higher interest rates make borrowing money more expensive thus deterring people from making big investments, so there is less money circulating in the economy which slows down inflation. To kick-start a sluggish economy, interest rates are lowered to encourage investment.

If the repo rate goes up, the prime goes up and the amount you pay on your bond increases. If the repo rate goes down, the prime goes down and those savings are passed on to you.

A lower interest rate means more affordable monthly repayments as well as substantial savings on the total cost of your home over the lifetime of the bond. If there is a hike in interest rate, however, it could significantly affect your cash flow as your bond repayments would increase.

Fixed interest rates

Banks also provide the option of a fixed interest rate home loan structure, usually for a specific length of time of up to five years. This means that the interest rate doesn’t fluctuate during the fixed rate period, allowing you to accurately predict and plan for future payments as you will know exactly what your repayments are.

Consumers fix their interest rate if they believe that the interest rate cycle is on an upward trajectory. This said, the decision to fix a home loan interest rate depends on individual circumstances and should be a carefully considered option. It is ideal for consumers who own multiple properties as the stable rates would buttress against future rate hikes. The disadvantage of this option is that it could result in the homeowner missing out on savings should the Reserve Bank decide to switch to an interest rate reduction cycle.

Do your research and speak to a bond originator before deciding on a home loan option.

– An access bond is a type of home loan that allows borrowers to pay extra money into their bond, which can be withdrawn whenever they need it, or they can use it to reduce their monthly home loan instalments.

– If you are getting ready to buy a home, the first thing you want to do is to have all the required documents ready to apply for a home loan  this will allow the process to go much quicker. It is worth noting that there are standard documents you require, but depending on your lender and purchasing method you might require additional documentation. We cover all the documentation required by most financial institutions in South Africa.

Here is a run-down of the documents you will need for a home loan application and additional documents required if you are buying through a trust. We also take a look at individuals that are self-employed.

Documents you require for all applications

• A copy of your ID document
• A copy of the offer to purchase containing both the seller and purchaser’s details
• Proof of income. You will need to provide a salary slip (not older than two months), or a letter from your employer with a breakdown of your salary and deductions. If you are self-employed then you will need a letter from an accounting officer confirming your income, or a statement of your assets and liabilities
• Six months’ worth of bank statements

Employed buyer

• If your earn commission or overtime, provide the latest 6 months statements. Statements should be verified and supplied by the bank – internet statements aren’t acceptable.
• Copy of your ID document.
• Copy of Marriage Certificate or ANC Contract (if applicable).
• Application form and consent document.
• Copy of the Purchase Agreement.

Self-employed buyer

• Proof of income: Letter of Drawings from an Accountant (for all applicants if applicable).
• Personal Assets & Liabilities Statement.
• Latest 2 years’ Annual Financial Statements.
• Where Annual Financial Statements are older than 6 months to date, Current Management Accounts not older than 2 months signed by the applicant and accountant must be provided in addition to the Annual Financial Statements.
• Copy of Marriage Certificate or ANC Contract.
• Copy of Registration Documents or Trust Deed.
• Application form and Consent Document
• Copy of Purchase Agreement.

Documents you require for a trust

• A copy of the Trust Deed
• A resolution by the trustees advising who may sign the home loan or pre-approval application and property purchasing documents

Remember that the more information you have ready, the quicker and easier the bond approval will go. Getting prequalified is always a great idea and using MyProperty’s Bond Calculator will allow you to get an estimate on your monthly bond repayments.

– Unfortunately according to the National Credit Act it would be against the law to provide you with further credit whilst under debt review. You will have to settle all your existing debt before you will be able to apply for further credit.

It would also be advisable to have your ITC records cleared after debt review so that the banks will not decline your application in future.

– If the tender amount by the builder reflects a realistic or market-related construction cost to build your dwelling then the occurrence of a shortfall will be highly unlikely. However, if the loan amount approved or required is less than the tender amount, any difference between the loan amount and the tender will have to be paid by the customer from their own funds upfront towards construction progress or the purchase of the land; before the bank will allow any advances from the loan amount. If the tender amount is totally insufficient in relation to a realistic market-related cost to build the dwelling the bank will most probably decline the application upfront or request that the customer supply the bank with another more realistic tender.

A shortfall may occur in the following instances:

• when the bank’s estimated construction cost of what it will take to complete the building is higher than the contract price quoted by the builder
• when the loan applied for by the customer is less than the contract price
• due to a combination of the above

– The fee charged by a Bank to cover the initial costs of processing a home loan application.

– If you are thinking about selling your home, you probably have a bond that needs to be settled, which could likely lead to a 90 day early termination charge.

The National Credit Act allows banks to process this fee if a seller gives notice of the intent to cancel their bond before the end of the conventional 20-year loan period. However, if you have a relatively new bond that you would like to cancel (within in the first two years), you would also be liable for a penalty interest of approximately 1% of the amount that you owe. This penalty will be applied once the house is sold and deducted from the proceeds of the sale.

Keep in mind that the 90’s day written notice does not mean automatic cancellation of the bond at the of the period, it only represent the intention to sell your property and cancel your home loan. It is best to do this before you put your home on the market. If the home does not sell in that time, a new letter must be written to start the process again.

Only when a conveyancer requests the final figures from the bank, will the bond be cancelled – and this only happens after the property has been sold and the attorney has received all the required documents.

If you do not provide the required notice, the date the conveyancers request the final figures will be considered the start of the notice period. The cancellation fee will then depend on the time taken to register transfer of the property.

The rules

• The 90-day notice period may be waived by the bank if a new property is purchased and another bond is taken out with the same financial institution.
• Penalties are not applied for sequestration.
• Penalties are not applied for deceased estates.
• Where loans are cancelled within the 90-day notice period, pro-rata interest is charged on the remaining days.
• The notice period does not expire if cancellation instructions have been issued to the conveyancers.

– The benefit of paying extra on a mortgage isn’t just in reducing the monthly interest expense a tiny bit at a time. It comes from paying down your outstanding loan balance with additional mortgage payments, which slashes the total interest you’ll owe over the life of the loan.

Even paying as little as R50 extra on your bond, you can immediately start saving on interest.

By paying R50 extra on a R500 000 Home Loan on a 10% interest rate for 20 years, you will be able to pay off your home loan in 19 years and three months, while saving over R24,941 in interest that you would have paid to the bank.

You should also consider paying a lump sum if you get a bonus at work for example.

– Regardless of whether the variable home loan interest rate falls or rises, the reducing interest rate or step down rate option will apply for the agreed period (usually less than 5 years).

This facility guarantees that your interest rate will decrease by a set percentage every three to six months for the agreed period. Should this option be terminated before the expiry date an additional finance charge can be levied by the lender.

– Having your home loan declined can be a very disappointing experience – but if you know why it was declined, you can take steps to rectify it.

Here are some of the key reasons your home loan could be declined:

You have a poor credit history

Your credit record contains details of your current and past financial behaviour – it shows all your previous and current debts, and how you have managed that debt. It includes things like cellphone subscriptions, credit cards, personal loans, and any other credit you repay monthly.

Did you miss repayments or made late payments? These can leave black marks on your credit report and lower your credit score. A poor credit history and a low credit score is a red flag that warns prospective lenders of higher risk, and it could be the reason your loan application is declined.

Keep in mind that if you don’t have any credit history, banks will also be wary to lend you a significant amount of money as they have no history to see how you manage debt and repayments.

Make sure you build a credit history responsibly.

You have a low affordability score

Affordability comes down to making sure you have enough funds to repay all your debts, including a home loan repayment.

When you compare your monthly income to your existing monthly expenses, debt repayments, and other financial commitments, the amount you have leftover is called your discretionary income. Whether the bank considers a loan ‘affordable’ for you depends in part on how much of your discretionary income the loan repayments will take up.

The best thing to do is to create a monthly budget, with savings built-in and see how much you could actually afford to spend on a home loan.

Here is a guide on how to determine how much you can afford

Too many credit applications

While it might be tempting to simply apply for a home loan at another bank or financial institution right after your first home loan application was denied, you really shouldn’t.

Remember that every credit application you make goes on your credit record and multiple applications for credit in quick succession is also a red flag.

To lenders, multiple applications in succession could mean someone is trying to get as much credit as they can because they foresee cashflow problems ahead. If they take on too many loans, they could also struggle to repay them all – another reason too many applications will affect someone’s credit score.

What to do when your home loan has been declined

The best thing to do when your home loan has been declined is to enquire why it has been declined.

If the problem is affordability, your lender may be able to advise you on how to restructure your credit portfolio so that the loan is affordable. Or the solution might be setting your sights on a smaller loan.

If the problem is your credit record, take comfort from the fact that you can restore it over time. Your service provider can advise you on what steps you can take to improve it.

Remember: a certain amount of well-managed debt can improve your credit score. A loan can be a force for good.

Here is a guide on financial fitness that could help you on your journey to become a home owner

– Having your home loan declined can be a very disappointing experience – but if you know why it was declined, you can take steps to rectify it.

Here are some of the key reasons your home loan could be declined:

You have a poor credit history

Your credit record contains details of your current and past financial behaviour – it shows all your previous and current debts, and how you have managed that debt. It includes things like cellphone subscriptions, credit cards, personal loans, and any other credit you repay monthly.

Did you miss repayments or made late payments? These can leave black marks on your credit report and lower your credit score. A poor credit history and a low credit score is a red flag that warns prospective lenders of higher risk, and it could be the reason your loan application is declined.

Keep in mind that if you don’t have any credit history, banks will also be wary to lend you a significant amount of money as they have no history to see how you manage debt and repayments.

Make sure you build a credit history responsibly.

You have a low affordability score

Affordability comes down to making sure you have enough funds to repay all your debts, including a home loan repayment.

When you compare your monthly income to your existing monthly expenses, debt repayments, and other financial commitments, the amount you have leftover is called your discretionary income. Whether the bank considers a loan ‘affordable’ for you depends in part on how much of your discretionary income the loan repayments will take up.

The best thing to do is to create a monthly budget, with savings built-in and see how much you could actually afford to spend on a home loan.

Here is a guide on how to determine how much you can afford

Too many credit applications

While it might be tempting to simply apply for a home loan at another bank or financial institution right after your first home loan application was denied, you really shouldn’t.

Remember that every credit application you make goes on your credit record and multiple applications for credit in quick succession is also a red flag.

To lenders, multiple applications in succession could mean someone is trying to get as much credit as they can because they foresee cashflow problems ahead. If they take on too many loans, they could also struggle to repay them all – another reason too many applications will affect someone’s credit score.

What to do when your home loan has been declined

The best thing to do when your home loan has been declined is to enquire why it has been declined.

If the problem is affordability, your lender may be able to advise you on how to restructure your credit portfolio so that the loan is affordable. Or the solution might be setting your sights on a smaller loan.

If the problem is your credit record, take comfort from the fact that you can restore it over time. Your service provider can advise you on what steps you can take to improve it.

Remember: a certain amount of well-managed debt can improve your credit score. A loan can be a force for good.

Here is a guide on financial fitness that could help you on your journey to become a home owner

• The additional criteria for self-employed buyers are understandably daunting, however, with the guidance of knowledgeable and experienced property finance specialists and property practitioners, it’s possible to seamlessly navigate the potential administrative minefield. that acquiring your dream home entails.

  As with any home loan application, the best is to be prepared with a deposit, and for those that are self-employed the bigger the better.

  Major banks vary slightly in their evaluation criteria when a bond application is made by a person who is self-employed, but the common requirement is proving that there is a steady income and that about 30% of the average net income can be used to service a home loan.

  If the applicant is divorced and maintenance is part of the regular income to be included in the earnings to be able to qualify for a bond, a copy of the divorce decree stating this should be included.

  If there are any lease agreements where income will be included in the income statement of the applicant, the rental amount must be current and not predicted future amounts. Some of the banks ask for copies of lease agreements in place or rental schedules.

  Paperwork

  Start by ensuring your paperwork is in order before you even consider applying for a bond, as it will save you a lot of time and hassle once the process is set in motion.

  Requirements can vary according to the application and the loan amount requested, but self-employed buyers will generally need to provide the following:

   

  • Comparative financials covering a trading or working period of the latest two years;
  • A letter from their auditor confirming personal income;
  • If their financials are more than six months old, the bank will need up-to-date signed management accounts;
  • A cash-flow forecast for the ensuing 12 months;

   

  • A personal statement of assets and liabilities;

   

  • Personal and business bank statements;
  • Their latest IT34, which is confirmation from SARS that their tax affairs are in order;
  • Their company, closed-corporation (CC) or Trust statutory documents;
  • The ID documents of all their business’s directors, members or trustees;
  • Depending on the complexity of their application, it may also be useful to provide a short CV.

   

  Tax affairs

  Make sure all your tax affairs are in order. Outstanding tax returns, of whatever nature, will have a detrimental impact on the outcome of your home loan application.

  Consider recruiting the services of a tax consultant or professional accountant if you need to as they can advise on how to best go out ensuring your tax is in order and creditworthiness is in good standing.

  Credit record

  A clear credit record is the foundation of sound personal financial management, and one of the first things that will be scrutinised when you apply for a home loan.

  Bad credit, which typically results from defaulting on payments and loans, filing bankruptcy and unpaid judgements, decreases your chances of having your credit application approved.

  All South Africans are granted one free credit check a year so it is advisable to that before putting the application process into motion. There is no need to panic if your credit record is unfavourable as it is possible to restore it to good health. A certified debt counselor can assist with this.

  Potential Pitfalls

  Potential pitfalls for self-employed applicants are where their financial statements are outdated and they do not have up-to-date management accounts; where they have not kept their personal expenses separate from their business expenses; where their financial and tax affairs are not in order.

– We take a look at some of the factors that could delay the registration of a bond:

• Failure by the seller and/or buyer to provide personal information.
• Failure by the seller to provide details of the bank holding the existing bond.
• Seller or buyer’s tax affairs not being up to date.
• Seller or buyer not complying with all clauses on the Offer to Purchase.
• Buyer not meeting all the special conditions of bond approval.
• The existing bondholder delaying/not providing cancellation figures and title deeds to the transferring attorney.
• A delay in receiving rates figures (local authority) and/or clearance certificate (transferring attorney).
• Failure by the buyer to pay a deposit (if required).
• A delay in the provision of guarantees.
• Failure by the buyer to pay the bond and transfer costs on time.
• A delay by the seller in signing the transfer documents.
• A delay by the buyer in obtaining government capital subsidy approval/employee subsidy documents for new bondholders and failure to comply with other requirements of the bank.
• A delay by the buyer in signing the transfer and/or bond documents.
• When the bond attorney, transferring attorney and cancellation attorney are three separate firms.

– Being pre-approved doesn’t mean that you are approved. It simply means that you have a likely idea of what you might qualify for once you apply for a home loan.

The benefits of taking the extra step

1. You won’t waste time looking for homes in the wrong price range

Mortgage pre-qualification generally provides you with an upper limit on the amount you can potentially qualify for. This could potentially widen your neighbourhood search – which means more properties to choose from.

2. You’re more likely to get an offer accepted

More and more sellers are looking for qualified buyers instead of taking their chances with interested parties that haven’t gone through the pre-qualification process. Being pre-qualified shows sellers that you are a serious buyer and that your offer to purchase is a serious offer as well – and in a competitive market this could be the difference between getting your dream home or having to start your search over again.

3. It will be faster to close on a home

Once you find the perfect property, chances are good you’ll want to move in quickly. And since it can take a long time to get approved for a mortgage and go through the closing process, you could find your timeline is slowed down if you have not started the process.

A true pre-qualification entails a fair amount of paperwork and work, which forms the basis of what the bank will require during the actual application stage.

In most cases originators can take up to 3 days to provide a pre-qualification certificate, MyProperty makes this available to you within 24 hours of completing the below link and submitting all your documents – get started here

Dedicated MyProperty consultants can assist you in the process from start to finish and will do the following for you:

• Previewing your credit score and profile
• Identifying red flags against your name and offering assistance to fix this
• Highlight any errors in your documentation and application
• Identify your marriage status and advise on possible outcomes
• Explain differences between self-employed vs salaried and what’s required
• Discuss possible products that would suit first-time buyers
• Provide you with a far more accurate amount you can purchase for, dependent on your inputs
• Discuss the hidden costs of buying a property
• Advise on the likelihood of approval

Ultimately, buying a home can be quite a stressful, overwhelming and frustrating process when attempting to do this on your own. MyProperty’s easy pre-qualifying process empowers you with an estimate that you can afford while also simplifying the bond application process, taking you one step closer to owning your dream home, without the stress.

– What is a home loan?

In simple terms, a home loan is money that you borrow from a bank or financial institution to purchase a property.

From the time that you secure a bond and it is registered, the home loan provider will keep your property’s title deed until your home loan is paid back in full. The home loan provider is legally entitled to keep the title deed because until you have fully repaid your home loan your home remains their property.

How does it work?

Your monthly repayments consist of a portion of the loan amount and interest on the loan. The amount of interest you pay depends on the prime interest rate, the interest rate of the home loan, and other factors such as whether you opted for the 20 or 30 year bond.

The higher risk you are, the higher your home loan interest rate will be. However, there are ways to mitigate this, such as paying a larger deposit or improving your credit record, which will result in lower interest rates, saving you money in the long-term.

Find out more about applying for a home loan

– The first payment on your home loan usually will be deducted on the first day of the month following the month of registration.

When signing your bond documents the bank’s attorney should be able to tell you when the first payment will be debited from your account.

Bonus TipTo ensure you are ready for the first couple of months of home ownership, we advise that you start living like you already repaying a bond and saving money to cover any unforeseen costs before you buy a home

– Most banks and financial institutions will require you to take out life insurance when you are granted a home loan – this is for a couple of reasons.

Firstly, when you take out life insurance your loved ones will be able to continue living in the house if you pass away as the life insurance will pay out a lump sum to cover the outstanding payments.

Not all banks or lenders however requires this but the risk of not having life insurance in place is too huge, wouldn’t you agree?

How much cover do you need?

If you only want to ensure your life insurance pays off the remaining debt on your home loan you will have to get enough cover to do so, if you want it to pay off other debts as well you will need to make the adjustments to include it as well.

Keep in mind that the size of your loan will reduce each year and that you will need to make adjustments to your life insurance accordingly.

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– The safest and easiest way to pay your home loan is via debit order.

Most banks will most likely include the signing of a debit order as a condition of the home loan as the bank will then be sure that they will be paid each month.

The bank will usually allow you to choose the day of the month that you want the payments to be deducted from your account.

The added benefit of a debit order is that if the base interest rate changes, your monthly repayment is automatically adjusted.

– All the banks have panels of conveyancers that they use for home loan registration and one of these will be instructed to register your home loan.

Your bond originator will have special rates with various attorneys on the banks’ panels and it is advisable to use one of those.

Furthermore, if the transfer conveyancer is also on the bank’s registration panel it will be expedient to let them do the registration as well.

– Prequalification is a basic review of your finances to determine if you would qualify for a home loan and if so an estimate of the size you would qualify for.

The benefits of getting prequalified for a home loan is that you will know what your credit score is and what you can realistically afford in home loan repayments every month. Another added bonus of being prequalified is that sellers will see you as a serious buyer, which could give you the edge in a competitive market and you won’t be wasting your time looking at properties outside of your affordability bracket.

It is important to remember that it is not a guarantee of a home loan, but it’s a very good indicator of what size home loan the bank will grant you.

MyProperty Home Loans can help you get prequalifed

– Interest rates have a remarkable effect on the overall cost of mortgage bond finance over the term of the loan. You need to understand that capturing correct and complete information prior to the submission of the application impacts the scoring decision of the bank, which in turn affects the interest rate decision of the lender.

A home loan expert will be able to provide the homebuyer with the best advice on how to secure the most favourable interest rate and therefore will discuss with every homebuyer the following important factors which influence banks’ pricing decisions:

Advantage of a Deposit

A deposit has the benefit of positively affecting the interest rate of the home loan. A 100% loan will possibly increase the interest rate or pricing. The bigger the deposit the better the rate the bank will consider in the light of the reduced risk.

Good Credit History

A good credit record also has a potential benefit of a more attractive interest rate pricing from the lender.

What determines interest rate?

1. Size of loan

2. Risk in terms of Loan-To-Value ratio

3. Scoring of the application

4. First time homebuyers are seen as higher risk as they do not have a track record of repaying a home loan

5. Full time employed versus self employed

6. Building loans are considered to be more risky than loans against completed properties

7. Existing customer of the bank or not

– Loan-to-value (LTV) ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a home loan. Typically, assessments with high LTV ratios are higher risk and, therefore, if the home loan is approved, the loan costs the borrower more.

Additionally, a loan with a high LTV ratio may require the borrower to purchase mortgage insurance to offset the risk to the lender.

 – If you are getting ready to buy a home, the first thing you want to do is to have all therequired documents ready to apply for a home loan- this will allow the process to go much quicker. It is worth noting that there are standard documents you require, but depending on your lender and purchasing method you might require additional documentation. We cover all the documentation required by most financial institutions in South Africa.

There is nothing quite as exciting as buying a home and while taking this big step can feel daunting when you look at all the paperwork involved, having all your documents ready will not only take away some of the stress, it will also help smooth over the process.

Here is a run-down of the documents you will need for a home loan application and additional documents required if you are buying through a trust. We also take a look at individuals that are self-employed.

Documents you require for all applications

• A copy of your ID document
• A copy of the offer to purchase containing both the seller and purchaser’s details
• Proof of income. You will need to provide a salary slip (not older than two months), or a letter from your employer with a breakdown of your salary and deductions. If you are self-employed then you will need a letter from an accounting officer confirming your income, or a statement of your assets and liabilities
• Six months’ worth of bank statements

Employed buyer

• If your earn commission or overtime, provide the latest 6 months statements. Statements should be verified and supplied by the bank – internet statements aren’t acceptable.
• Copy of your ID document.
• Copy of Marriage Certificate or ANC Contract (if applicable).
• Application form and consent document.
• Copy of the Purchase Agreement.

Self-employed buyer

• Proof of income: Letter of Drawings from an Accountant (for all applicants if applicable).
• Personal Assets & Liabilities Statement.
• Latest 2 years’ Annual Financial Statements.
• Where Annual Financial Statements are older than 6 months to date, Current Management Accounts not older than 2 months signed by the applicant and accountant must be provided in addition to the Annual Financial Statements.
• Copy of Marriage Certificate or ANC Contract.
• Copy of Registration Documents or Trust Deed.
• Application form and Consent Document
• Copy of Purchase Agreement.

Documents you require for a trust

• A copy of the Trust Deed
• A resolution by the trustees advising who may sign the home loan or pre-approval application and property purchasing documents

Tholulwazi Capital Bond Calculator will allow you to get an estimate on your monthly bond repayments.

Where do I apply?

Get pre-qualified or apply for a home loanby using our team of trusted home loan experts

– If interest rates rise or drop, the borrower’s home loan rate will rise or fall accordingly.

This facility is usually taken up if the borrower believes that interest rates are falling and is not too concerned about rising rates. Interest rates only apply to outstanding balances on the loan.

See how different interest rates will influence your repayments by using our bond calculator

– Consumers who fail to correctly declare expenses when completing a bond application may limit their chances of getting the best home loan deal possible.

When lenders assess an application, affordability – which considers your total income relative to living expenses – is an important measure used to determine whether you would be able to keep up with monthly home loan instalments or not.

This can further influence the home loan amount and interest rate you would be quoted for the term of the loan.

Therefore, taking the time to ensure that your living expenses are declared correctly can go a long way to ensure that you get the best possible bond deal from your bank.

Here are some of the common mistakes that consumers make when completing the expenses portion of a home loan application:

• Duplication – some applicants fail to get a good home loan deal due to the duplication of expenses.

For example: If you have declared funds that you prepay into your credit card monthly, which you may be using to fill up for petrol and for groceries, you need not complete the groceries and petrol expenses portion in the form.

Another form of duplication may arise if you are co-applying with a partner or individual that you stay with. In this instance, only one applicant may declare shared living expenses. For example, rent, water and electricity costs.

If the expenses are duplicated, lenders may not always be aware that the co-applicants stay together and share some expenses.

• Dishonesty – being dishonest about your living expenses may lead to your application being declined.

When applying for a home loan, banks require that you submit a payslip and six months’ worth of bank statements, amongst other documents. As a result, any disparity in the expenses portion of the form can easily be picked up by the bank.

• Entertainment – be careful not to mistakenly declare a high entertainment expense by failing to separate needs from wants.

For example, a need could be monthly costs for educational or recreational activities. While a want can be anything that you would possibly cut back on in tough times, such as movies or eating out at restaurants etc.

If you aren’t sure about how to correctly declare expenses, it is advisable to consult your bank or an expert to avoid making costly mistakes.

Have a home loan question? Ask our expert

– It is crucial to give notice to your Bank as soon as you have decided to put your property on the market for sale and/or cancel your existing mortgage bond. This is just to avoid the 90-day penalty interest that the mortgage bondholder is entitled to charge the Seller on the bond cancellation figures.

If the transfer of the property then occurs after 60 days of the 90 days’ notice then the Seller will only be liable for 30 days of penalty interest over and above the cancellation amount with the Bank.