Dealing with issues such as affordability and repayment
If you want to determine what amount you qualify for to purchase a property, your Property Professional will make use of an Affordability Table.
Usually, banks and/or other financial institutions look at a person's gross income (their salary or other income before TAX) when making a decision on the amount they are willing to borrow.
The general rule of thumb is that banks and/or financial institutions will allow 30 % of a person's income to be allocated towards housing: This is normally the amount a client will qualify for.
Nevertheless, a person's credit score and whether the person has ever been blacklisted before also play a role. When a person is/was blacklisted, the person can be seen as a liability and this will negatively impact the person's application for a home loan.
"Clients usually qualify for an 80 % home loan and we generally look at a twenty year repayment rate," explains Zani van Wyk, Principal of Property to Link. "If a client just doesn't qualify for a loan, we propose a thirty year repayment rate."
Another option is to combine spouses' incomes to be eligible for a higher percentage. Banks do however differ from one another: Some might give you a 100 % home loan if you are a first time buyer, while others might be even more - covering the transfer and bond costs as well.
But, if you are from a foreign country or you want to buy a commercial property, farm or plot, you will only qualify for 50 %.
How do the repayments work? It is normally 10 % of the purchase price. "If someone qualifies for R 2 million home loan, the repayment will be slightly above R 20 000 per month," says Zani.
Did you know that...
1. There are extra costs involved when purchasing a property such as transfer, bond and banking costs?
2. There is no law in South Africa that prescribes what percentage commission an estate agent may ask a client?
3. With some properties no transfer duty is payable?
4. "Voetstoots" basically means that an owner has to declare property faults but does not have to fix them? In other words, the buyer should be made aware of any and all property defaults.
5. You have to be honest with your Bond Originator if he/she asks you for an expense list?
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