How much can you af­ford to bor­row?

Saturday Star - - INSIGHT -

AS A guide, your mort­gage bond in­stal­ment should not be more than 25% to 30% of your reg­u­lar house­hold in­come be­fore tax and de­duc­tions, says Real­tors In­ter­na­tional.

If your in­come is ir­reg­u­lar – for ex­am­ple, you have your own busi­ness or rely on sales com­mis­sion, lenders have their own for­mu­lae for cal­cu­lat­ing what they con­sider you can af­ford.

Real­tors In­ter­na­tional pro­vides the fol­low­ing ex­am­ple where both spouses work:

• Hus­band’s salary (be­fore de­duc­tions): R15 700 a month

• An­nual bonus (di­vided by 12): R2 000 a month

• Wife’s salary (be­fore de­duc­tions): R12 200 a month

• Hous­ing sub­sidy: R1 500 a month

• To­tal house­hold in­come: R31 400 a month

At a 30% in­stal­ment-to-in­come ra­tio, this fam­ily should be able to af­ford a re­pay­ment of R9 400 a month, which means their max­i­mum loan would be R800 000, based on an in­ter­est rate of 13% a year.

OTHER COSTS

When you buy prop­erty, you typ­i­cally need to pay trans­fer duty, plus a bond reg­is­tra­tion fee and con­veyanc­ing fees.

Trans­fer duty is nor­mally paid through your con­veyancer. The amount de­pends on the prop­erty price, work­ing on a slid­ing scale: nil on prop­er­ties with a value of less than R900 000; R65 000 on a prop­erty of R2 mil­lion; R387 500 on a prop­erty of R5m; and R937 500 on a prop­erty of R10m.

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