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Before granting a home loan for the purchase of a property, a bank will review several factors.
These include:
- The credit record of the potential homebuyer, to see if he or she is in the habit of paying their bills on time and whether there are any judgments for bad debt outstanding.
- The employment prospects and disposable (after deductions) income of the potential homebuyer, to establish whether he or she will be able to afford the home loan instalments on top of other existing commitments such as car repayments, school fees and living expenses. The National Credit Act requires lenders to be very careful when granting any type of loan to ensure that the borrower will not become over-indebted.
- The market value of the property, to ensure that there will be sufficient security for the loan the potential buyer has requested. The bank would obviously like the property to be worth more than the loan amount at the outset, and projected to grow over time. This is why it is much more difficult to get a loan in any area where values are static or have been declining – even if the potential buyer has a great credit record and a high disposable income.
- The availability of a deposit. Banks always prefer it if a potential homebuyer can put down a 10 or 20 percent deposit because it shows that the buyer is serious enough about the purchase to commit some of his or her own money. A deposit also ensures a good loan to value (LTV) ratio – that is, that there will be considerably more value in the property than the amount loaned by the bank.
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Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.
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Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za
www.mortgagepluscc.co.za
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