According to data released by the Lightstone Property Group, you'll need to take home R35,000 to R39,000 a month to qualify for a home loan in the region of R1-million in South Africa.
An affordability calculator by any of the home loan credit providers can help you determine what you can afford in terms of bond payment, based on your earnings and expenses.
But earning the suitable amount does not guarantee automatic qualification of a home loan. While just being able to afford the repayment makes mathematical sense, there are almost always unforeseen expenses that may eat into your budget.
Mike Greeff, CEO of Greeff Christie's International Real Estate, highlights the other expenses potential home loan applicants should consider before applying, and how they can help to make the process successful.
- Additional costs
Buyers should be cognisant of additional costs that will arise during the purchase process. Transfer fees or costs cover the transfer of the property to the deeds office, from the seller's name to the buyer's name. Buyers will also be liable for the registration costs of the bond.
And apart from your monthly bond instalments, there are additional costs to keep in mind such as levies, maintenance and rates.
Buyers should also bear in mind interest rates — which may affect bond repayment on a month-to-month basis, depending on how the economy is performing.
- Credit score
Earning in the region of the home you're looking for is not enough if you're heavily indebted, because debt can severely affect your credit score. This is a compilation of information about how you handle debt that creditors use to assess your financial reliability.
A good credit status can help improve your chances of being approved for a home loan. A poor credit score reduces the chances and, if a loan is granted, it is likely to be at unfavourable interest rates — resulting in higher interest rates and longer payment terms, which cost more in the long run.
A solution here would be to clear as much debt as possible. Paying off debt from items purchased on store credit accounts or microloans will have a positive effect on your credit score.
How you can help the process
- Save for a deposit
Deposit amounts on home loans usually start from the minimum of 10 percent of the purchase value of the property and have a two-fold benefit — reducing your monthly bond repayment amount, as well as increasing your affordability score with banks. The more substantial your deposit, the better your chances of being granted a home loan.
Having a healthy deposit also shows lenders that you have the discipline to save, and that you are committed to the buying process. A good deposit also puts you in a better position to negotiate your interest rate with the bank. Even a small reduction can result in a saving of thousands over the duration of the loan term.
- Obtain a prequalification
A prequalification certificate is valid for 90 days and indicates how much you qualify to spend on a house. Being certified can make or break the seller's decision to accept your offer or not. Bond originators are often used here, as they are equipped to obtain your credit score as well as a prequalification certificate.
The two benefits are that you will know what your budget for an affordable property is, and you will be able to show the seller or estate agent that you are a serious buyer. It provides peace of mind to both buyer and seller, and allows the buyer to get a feel for the application process, which entails sourcing all the relevant documents required by the bank.