How to get a Homeloan Bond in 3 Easy Steps
EVER WONDERED IF YOU COULD QUALIFY FOR A HOMELOAN?
This article aimed at the first time home buyer, will show you how to qualify for a bond.
To make things easier to explain, I have used an example of a typical townhouse in Johannesburg that would rent out for about R 6000 per month.
We have therefore used an example of a R 600 000 homeloan.
Interest rate 7%, over 30 years.
The bond repayment of approx. R 4 000
1: Affordability – The 30% Rule
Banks will ensure that your monthly bond repayment, also know as the monthly bond installment, must be less than 30% of your basic monthly salary.
Your basic salary is your monthly salary before deductions (Not the cost to company figure!)
Simple way to work it backwards. Take the bond payment and divide it by 30% .
R 4 000 / 30% = R 13 333 ( So you must earn higher than R13 333 per month to qualify for a bond.)
2: Monthly repayment affordability
Do a monthly income and expenses exercise and show the bank that you have sufficient monthly income to be able to pay the monthly bond cost plus the monthly levies and utility charges.
Generally on a property of this size, the bank will add R 2000 to the bond repayment to get to an “affordability number”
In this example. You would need to do your monthly budget of income and expenses and show that you can afford R 4000+ R2000 = R6000 per month to qualify.
Note: In your budget, take out your rental payment as this will be replaced by the bond payments
3: Credit score
The credit bureau calculates a “credit score” for any person who has credit. The banks then have their limits below which they will not grant a bond. An added bonus of a higher your credit score the lower interest rate you can negotiate!
How to increase your credit score?
Take out at least one retail account or credit card. Not simply an account. You must have an account which will let you spend up to a certain limit (your credit limit) that you pay off in monthly installments.
Do the following:
- Pay these monthly installments religiously.
- Pay the installment in full and never late.
- Don’t use more than half of your credit limit. This shows the bank that you are spending within your limits.
Do not take out any “payday loans” or “micro loans”. They are expensive and they show the bank that you are not in full control of your finances.
That’s it, how to get a bond in three easy steps.
Check out this video interview with Rodney Reynard of MortgageMax