Getting a bond if you’re the boss

With now being the ideal time to buy, many people would like to know what they need to secure a home loan – which is more problematic if you’re self-employed

It’s estimated that about 15.5% of all working South Africans are self-employed, according to data compiled by the World Bank, and this number may well increase as companies cut back on full-time jobs to mitigate the financial impact of Covid-19.

Whether working for oneself is out of choice or necessity, there’s a common perception that applying for finance, be it for a car or a home loan, is likely to be more challenging. However, with the interest rate at its lowest in over 50 years, it would be a pity to let some extra paperwork stand in the way of making a sound investment.

Being self-employed doesn’t mean having to give up on the dream of owning your home, says Jenny Rushin, national development manager, BetterBond. It may just require a bit more paperwork and the guidance of an expert who can help you through the application process.

“The long-held perception that it’s difficult to buy property when you’re self-employed isn’t really true anymore. Even when you’re not permanently employed, and don’t have a regular, fixed income, it’s possible to submit a successful home loan application. And you could improve your chances by using a bond originator,” says Rushin.

Salaried vs self-employed

While the national average at BetterBond of self-employed applicants is sitting at almost 9%, and even higher than that in the Western Cape, with almost 12% being self-employed, Kelly Fisher of Cape Town thought there was little chance that she and husband Calvin would qualify for a bond, as he has been self-employed for more than four years.

Thinking she would stand a better chance of securing finance, as she works for a company and earns a monthly salary, Kelly initially applied. But she soon realised that, on her own, she would not qualify for the amount they needed.

She then started researching what documents they would have to submit if Calvin applied for the bond as a freelancer. “I found very little information that was of help, and it was only until I reached out to someone I knew at a bond origination company that I understood what we needed.”

Talk to the experts

Kelly says she was nervous at first to proceed with the application. “I thought, what are the chances that we’ll get it? But our consultant allayed our fears.”

While there was some extra paperwork – six months’ bank statements instead of three, as well as testimonials from Calvin’s main clients – the application process was surprisingly smooth. Calvin qualified for a 100% bond and the couple did not have to pay a deposit.

Some more effort

Rushin says that a bond originator will apply to multiple banks on your behalf, including your own. “The applicant does one set of paperwork and we ensure that all the required information is ready for submission to make the application process smoother – and it’s completely free.” There are a few things you can do to ensure a successful bond application as a self-employed applicant. Remember that the idea is to show that you have a proven history of managing your finances responsibly.

1 Make sure your tax and financial affairs are in order and up to date.

2 Check your credit record – you’re entitled to one free check per year.

3 Ideally, you should keep your personal and business income and expenses separate. Banks will look closely at affordability and it’s best to present them with the clearest possible picture.

4 Work with a bond originator to check your application to make sure you stand a better chance of success once you’ve found a place you want to buy.

5 Save as much as you can towards a deposit.

The paperwork

For a self-employed person, the bond application may seem like a lot of documents to submit, but having everything in order will avoid delays.

These are the most important documents you’ll need:

1 The last two years’ set of financials. If your financials are older than six months, you’ll need up-to-date signed management accounts.

2 An auditor’s letter stating your income, and the expenses paid for by the business.

3 A signed personal statement of assets and liabilities, and personal income vs expenses.

4 Personal and business bank statements for the latest three months.

5 Your latest IT34 from SARS.