It was fairly common in the ‘bad old days’ for those applying for a bond to approach the institution where they banked. Broadly speaking, if the bond application was turned down, most people gave up on the idea of owning a home and continued renting accommodation for a few years before trying again.
Bond origination companies changed all that. Virtually a one stop shop, this fantastic business model not only opened the door for buyers to approach all the major banks, it actively sought out the lowest interest rate and passed this saving on to the client.
Despite this, there are still buyers who assume that the major banks offer the same loan to value policies. However, according to Michael Bauer, MD IHPC estate agency, this is certainly not the case. “There are some instances where one or two of the banks are stickier than others, and IHPC’s origination division has noted that banking policies vary quite a lot.
“For example, in the case of a new loan, two of the banks offer up to 30-year loans, while the other two are only willing to finance for a 20- or 25-year period. And while three will consider granting home loans to non-clients, one will absolutely not.”
He adds that although self-employed applicants always find it more difficult to get a home loan, the good news is that one of the major banks will still consider a 100% bond for a self-employed person if the value of the property is under R1.5-million – even if the buyer is not a direct client of that bank. That said, two of the banks will not consider granting a bond to a self-employed person unless the applicant has business accounts with them.
When it comes to the percentages banks will grant in proportion to their value, the higher the current value of the property, the lower the loan percentage is, across the board.
“What some people may not realise is that affordable housing is in a category of its own and here the banks look at joint salaries of up to R18 600. The applicants in this category can qualify for bonds up to 105%,” said Bauer.
For SA citizens working abroad, two of the banks will only grant 50%, one up to 70% while one institution will go up to 100% depending on the price. For the latter, again, the higher the price of the property, the lower the percentage loan that will be granted. Foreign nationals buying in SA will only get 50% bonds.
Bauer notes that because the various banks’ criteria can be fickle and stringent and in some cases change fairly often, it is highly advisable for buyers to use the services of an originator.
He has a good point. Buyers who do choose to go it alone need to remember that points are deducted every time a credit check is carried out. If the buyer has to approach a number of different banks in an attempt to secure a loan this is reflected on their credit rating. Originators on the other hand go into the deal forewarned and as such, will generally only apply for finance from banks where it believes the client has a good chance of being successful.