New law means applications for home loans entail more detail and will be scrutinised carefully
Many homeowners are selling their homes to downscale or upgrade and the majority will again be applying for home loans in order to purchase their new properties.
Most will find that the application process has changed considerably since they last went through it, says Carl Coetzee, chief executive of home loan originator BetterBond.
He says they should be prepared for their overall debt situation, as well as income and monthly expenditure, to come under much closer scrutiny, because of the National Credit Act.
“Although the banks are eager to lend to home buyers at the moment, this legislation requires them to ensure that any new credit application they approve will not result in the consumer becoming over-indebted and they take this very seriously.”
Today, buyers are encouraged to engage the services of bond originators to streamline the process, increase their chances of approval and ensure they get the best available interest rate.
The average difference between the highest and lowest interest rates offered on a single loan application is 0.5%, which can make a big difference over the lifetime of their home loan, Coetzee says.
“On a R1.5 million loan, for example, a rate concession of 0.5% translates into total savings of about R6000 a year on your instalments, and more than R118000 on the cumulative cost of the property over 20 years.”
Furthermore, the National Credit Regulator says the average rate of credit application approvals in South Africa is about 40%, whereas BetterBond’s rate of approval for the applications it submits is consistently over 75%.
To ensure the application process runs as smoothly and quickly as possible, even when using a home loan originator, he says repeat buyers should be prepared to provide their originator with the following:
* Personal details such as full names, ID number, tax number, date of birth, phone numbers, marital status, number of dependants, level of education, current address and length of stay there. These details should all be supported with hard copies of the relevant documents, such as an ID book, marriage certificate, school and university qualifications, most recent tax return and a council account that verifies their address.
* Employment details such as the name, address and phone number of their current employer and similar information about any other employers in the past two to five years. They will also need to state what position they hold and the type of work they do. This information should similarly be supported with documents such as an appointment letter and a formal job description, as well as copies of any specialised qualifications.
Include income details such as gross and net household earnings, supported by three months’ worth of payslips and bank statements. Regular overtime payments and any bonuses, commissions, dividends, interest and rental income may also be counted as income, and single parents may also include court-ordered alimony or child support payments
* Monthly expenditure details, including all instalments on existing debts, other regular payments such as school fees, insurance premiums, cellphone costs and water and electricity bills, and their average monthly grocery, transport and entertainment costs should be provided.
Coetzee says they might also need to provide a copy of any offer to purchase that has already been made, a copy of the property title deed, if available, and a copy of the building contract if the home loan applicant is intending to buy a plot-and-plan home. Applicants whose existing homes have already been sold should also provide copies of all the documents relating to that sale and showing what their proceeds will be and when these are likely to become available.
Prospective borrowers should be prepared to provide details of any other assets they own, such as savings, shares, holiday homes, rental properties and life insurance policies.