Oudtshoorn Courant - Private Property
How to assure you get bond approval
With interest rates at an all-time-low, first-time buyers might be considering their chances of entering the market.
"As things stand, residential real estate services will only be made available at Level 2 of lockdown. While the Deeds Office is open at Level 4 and sales can technically be processed, there are various obstacles in the way that limit the possibility of concluding any new sales," says Adrian Goslett, Regional Director and CEO at RE/MAX of Southern Africa. "As an industry that contributes about 5% of South Africa's GDP and that employs 42 000 people in the residential sector alone, we urge Government to reconsider their reclassification of the real estate industry so that real estate transactions can go ahead to give our economy a better chance for recovery."
Potential buyers who are waiting for real estate services to re-open so they can view their dream home in person before putting in an offer, should pay attention to several factors and some spending habits to ensure future bond approval:
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As difficult as it may be right now, aspiring buyers need to ensure that all debt repayments are made on time every month. Any late or missed payments will decrease the chances of bond approval and affect the interest rate the bank will provide on the loan. Aspiring buyers should also avoid applying for any additional credit over this time, as multiple credit enquiries will weaken their credit score.
Lower your debt
Disposable income is a key element to bond approval. A person's debt-to-income ratio affects their affordability levels, which the bank uses to determine the bond amount and approval. Aspiring buyers will need to try and reduce their existing debt to below 30% of their credit limit to increase their chances.
Keep a stable employment history
Having permanent employment reflects a stable income, which is one of the factors lenders look at when considering bond applications. An employment record of at least six to 12 months would work in a buyer's favour. If a buyer has recently been retrenched and has had to start a new job, the lender may regard them as a credit risk and might not approve the application.
Spend within your budget
Especially during these uncertain times, it is advisable to shop under budget to allow room for other expenses such as your rates, taxes, maintenance costs and, if you've chosen not to take a fixed interest rate on your bond, possible interest rate changes.