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The current financial crisis the world is experiencing, coined the ‘credit crunch”, is resulting in many property buyers finding it difficult to obtain a home loan. The Banks are very averse to risk, and do not undertake the issuing of loans lightly. |
If you are in the home loan market, you’ll need to comply with the following criteria at least:
- 10% deposit on a property up to 2.5million
- 20% - 25% deposit on a property over 2.5million
- 70% deposit on vacant land; and the client must qualify for a higher amount in order to build.
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Important things to remember on the credit scoring used by the Banks:
- Affordability – they normally take 30% of gross income.
- Income and Expenditure - they look at the surplus after all deductions and expenses have been taken off, to see if there is sufficient to service the bond repayment.
- Credit risk is linked to a score card. If your credit risk according to their scorecard is negative, the loan will be automatically declined by the system, before the paperwork even gets to a Credit Manager, (this saves the Banks money on unnecessary admin costs).
- Credit bureau must be clear of any judgments or negative comments, e.g. bad debt written off, or even a trace alert.
- Payment History - how the client conducts his retail accounts, and ‘unpaids’ on personal bank accounts.
- How much debt the client is exposed to.
- Lastly, the property they are bonding must offer excellent security.
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The costs involved in obtaining a home loan are:
- Bank Initiation fee - maximum of R5000.00 (updated to R5 985 in 2016)
- Transfer Duty will apply on property values over R500 000.00 (Updated to R750 000 in 2016)
- Transferring attorney charge a fee to put your name on the title deed.
- Bond Costs for drawing up the bond documentation in favor of Bank of choice.
- Deposit.
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Denise is the National Sales Manager of iLoan Home Loans
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