In association with Credit Health (www.credithealth.co.za), Meyer de Waal of My Budget Fitness and director of Oosthuizen and Co Meyer de Waal launched a new initiative: Whose Bond Are You Paying? Nowadays, too many people are trapped to rent, because they are unable to obtain a home loan. The main reason for this is that home loan applicants have too much debt and/or have bad credit profiles.
Having a roof over your head is one of the basic needs of any human being, whether a one-bedroom/studio apartment or a 7-bedroom mansion.
Many South Africans aspire to owning their own home. In fact 60% of South Africans own, or are paying towards owning, their own home (Business Report, 26 June 2012).
That makes home ownership rates in South Africa higher than in Germany, the UK and the USA.
Remember that owning more than one home allows you to tap into the rental sector to service the 40% of the population that cannot, for any number of reasons, purchase their own home.
The important question is: are you paying off someone else’s bond or are you paying towards a home that you will eventually own?
As most homeowners know, the road to purchasing their own home wasn’t easy. If searching for the perfect home in the perfect area wasn’t hard enough, obtaining finance for the purchase made it even more stressful.
If you decided to build your own home, you had to have at least 30% deposit as most banks have a policy of only financing 70% of the home to be built.
In context, a home that would cost R750 000 would mean that you would have to be able to produce a R225 000 deposit.
Most developers have now pre-approved their developments for 100% bonds as long as purchasers meet the minimum requirements for the bond approval.
If you were purchasing a home from another homeowner, you could probably obtain a 90% to 100% bond approval, but would need additional cash for transfer fees, as well as for fees payable to the attorneys and bond registration costs.
However, all this is incidental. You would still need to have a good credit score. Few banks will even look at your application if your credit rating is below required standards.
Furthermore, banks need to ensure that you can afford the repayments on the bond as per the National Credit Act.
Therefore a good credit record and a reasonable disposable income (income remaining after you’ve paid all your expenses) are the “foundation” for your loan application to be approved.
Building a good credit record is essential in order to be able to purchase a home. This is fortunately one of the factors within your power.
Banks need to ensure that you’re able to service your debt on time and that you don’t have any accounts that are in distress due to late or non-payment. This information is gathered from your payment profile on your credit report.
All your creditors report your payments (or non-payments) to the bureaus on a regular basis and this information is also used in calculating your credit score. Note that the information may not always be correct and that the bureaus rely on the credit providers to provide the correct information on your payments.
You have the right to dispute any information on your credit report that you believe is incorrect. If you’re considering buying a home or if you have found your dream home, consider reviewing your credit report prior to applying for finance.
It will give you an opportunity to ensure your information is correctly stated and also give you sufficient time to dispute any incorrect information.
Knowing your credit status also empowers you with regard to being able to negotiate with banks on the proposed interest rates and finance terms.
By completing the following survey, we can assist you in advancing from tenant to purchaser! Click on the link below to access our quick and simple survey: