Tips on how to make a joint bond work for all parties, including the bank
More people are choosing to apply for joint bonds which not only help with affordability but also might be the key to some great investment opportunities.
But even joint applicants need to polish their financial profiles, says Ria Venter, regional manager for Rawson Finance.
She offers some tips to improve the chances of approval:
Ditch the debt: Debt is one of the first things banks look at when assessing bond affordability. It doesn’t matter how many applicants there are – any bad debt will count against you. To qualify for the largest bond at the best interest rate, Venter recommends getting rid of any unnecessary store cards, credit cards and loan accounts.
If you can tighten your belt to pay off a car loan, that is good.
“Ideally, you need as few as possible expenses coming off your bank accounts each month. This shows the bank that you have sufficient disposable income and that each of you is serious about your financial health.”
Build a strong financial history: A record of good debt is a powerful tool for looking good on your joint bond application.
“Banks like to be able to see that you have a history of paying what you owe timeously and responsibly. A good financial track record counts in your favour.”
If none of your co-applicants has ever had a loan, store account or credit card, you can consider opening a credit account purely to build a positive history, Venter says. Just do not fall into the trap of using credit unwisely.
Put your best foot forward: Chances are, one person’s financial profile will be stronger than the other’s on a joint home loan application. Whether that’s because of a higher income, better credit record or more stable employment, it makes sense to play up those strengths.
“It’s smart to make the most attractive applicant the primary applicant. It gives the banks a good first impression.
“It won’t make up for any serious black marks on other applicants’ records but can help boost your overall profile enough to encourage lenders to come to the table with their best offer,” she says.
Don’t forget to protect yourself: Having rock-solid agreements in place to protect all applicants on a joint bond is essential. It might not help you qualify for a home loan but it will make sure everyone taking part in the investment is on the same page.
Venter recommends getting a lawyer to help draw up a joint purchase agreement that clearly outlines each person’s buy-in, responsibilities and ownership proportion. Life insurance for each applicant is also a good idea to cover their portion of the costs in the event of their death.
“Just remember, you’ll all be equally liable for your loan in the eyes of the bank, no matter what you agree privately. Protect your interests with iron-clad contracts but also ensure you’re investing alongside people you can trust.”