Self-employed Home Loans

The banks have become a lot more cautious when assessing self-employed mortgage bond applicants.

Gone are the days that an income letter from an accountant, supported by six-month bank statements, sufficed. In this challenging economic climate, banks want to scrutinise the stability of the organisation before they will consider a self-employed applicant as a viable debtor, irrespective of the security offered as collateral.

It’s now all about affordability and sustainability! So how do self-employed entrepreneurs ensure that they are first in line when it comes to laying their hands on some of the available funds in the banks’ coffers?

It is advisable to have separate business and personal current accounts. The turnover through these accounts will be compared with all financial statements and income declarations. If these figures don’t coincide, self-employed individuals must be prepared to submit their latest income tax assessment as proof of income.

Effective administration systems are vital, with all documents up to date, accurate and readily available. The banks will require a full set of signed-off financial statements with comparable year-on-year (y/y) figures and management accounts from the previous financial year to date. And as if this is not enough, certain banks are even calling for cash flow projections.

Banks will only accept income letters and signed-off financial statements from a registered accountants or bookkeepers. Business owners must ensure that their accountants or bookkeepers are registered with one of following institutions:
- The Institute of Administration and Commerce of Southern Africa
- The Chartered Institute of Management Accountants.
- The Southern African Institute of Chartered Accountants.
- The Southern African Institute of Chartered Secretaries and Administrators.
- The Chartered Association of Certified Accountants.
- The Southern African Institute of Business Accountants.
- South African Institute of Professional Accountants (SAIPA).

Lending policies differ from bank to bank, with some banks only accepting application for self-employed individuals who have a business account with them, while others will only consider this if the applicant is willing to put down a substantial deposit. Where some may be tad more flexible, others will stick to their rules no matter how strong the mortgage bond application may be.

Mortgage bond applicants will only be made aware of which of the four commercial banks is more likely to approve their application if they deal with a professional independent mortgage bond consultant (Mortgage Plus bond originators).

In recent months, we have seen many a small and medium enterprise (SMME) downsizing, consolidating and restructuring, with some even having to close their doors altogether. This, coupled with the banks’ lack of appetite for risk, has led to some of the most stringent credit criteria being applied to self-employed entrepreneurs. Good governance and sound business practice is the rule of the game.Unfortunately, those with the money to lend lay down the rules and those in need will just have to comply.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Keep Your Cool When Lenders Ask Questions

More and more financial institutions rely on automated credit scoring systems when making lending decisions, but even these sophisticated systems can have trouble processing certain parts of your credit history, and it’s then that you’re likely to get a call from a human asking for an explanation.

“But this is no reason to panic about not getting the loan,” says Berry Everitt, CEO of the Chas Everitt International property group, “and certainly no time to get defensive and hot under the collar.

“You may well have been very good about keeping your credit rating up by never borrowing more than you could afford and always paying your bills. But it is also quite possible that in the past few years you have made some payments ‘late’ and that these are showing up on your record.

“It is important to understand that what credit bureaux and banks regard as ‘late’ payments are those made more than 30 days after the due date on the account, and that most will require an explanation for such incidents, even if they seem minor to you.”

The best course in these circumstances, he says, is always just to tell the truth. “For example, if you genuinely can’t recall why the monthly payment on a store card was made late once two years ago, say so. If you missed paying a telephone account because you were away on holiday, say so. Be honest if something happened that made you forget to post a batch of cheques one month.

“This sort of thing happens to everyone, and banks generally don’t expect a perfect credit record. Usually what they want is just to obtain a reasonable explanation from you that they can fill in opposite any credit query that their automated system has thrown up.”

Everitt says that those with really big credit problems in their past, such as bankruptcy or home repossession, should also be totally honest about it – and provide a full, detailed and documented explanation to their bank or originator before applying for a new loan.

“They should know that there is still a good chance of getting a loan if they can show with third-party verification that what happened was beyond their control – because of an accident, for instance, or because of a sudden serious illness or the loss of a job – and that their circumstances have now changed for the better.

“On the other hand, there is virtually no chance of a loan if they try to hide the earlier problems and they emerge during the bank’s application evaluation process.”

Remember by choosing us for a loan, you will get professional advice to make sure you are getting the best deal possible.

CONTACT US

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.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za