FAQ ON PROPERTY FINANCE



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1. I have changed jobs several times. How will this affect my obtaining a loan?
2. Can I get a loan if I am self-employed?
3. How much deposit will I need?
4. What happens to the deposit?
5. How is the balance of the purchase price paid?
6. Is it possible to inflate the purchase price to secure a higher bond?
7. Once I find a home, who or what determines the value of the property?
8. I do not have any credit available. Can I get a home loan?
9. What is an Access Bond?
10. When is transfer duty payable?
11. What bank is the right one for me?
12. I just moved in the past six months. Will that affect my ability to get a loan?
13. What do I need to consider if I or my spouse was divorced?
14. How does bankruptcy affect my ability to get a loan?
15. Will I pay an application fee? What is this fee designed to cover?


1. I have changed jobs several times. How will this affect my obtaining a loan
 
This depends on how often have you changed jobs and for how long you were employed in your last job. A steady employment record is very important as it reflects the stability of our proposed client.
 
As long as you're in a similar industry, making similar money, it won't affect you. The only differences might be if you were salaried and now you are commission-based in your pay, if you're now self-employed, or went to an entirely different industry making less money. Another factor that will be considered is how often you are changing jobs.
 

2. Can I get a loan if I am self-employed?                                                                                           Property Network NavigationTop
 
Financial institutions lend to self-employed persons in the same way as for salary employees. The difference comes with confirmation of income and affordability. The client will be requested to supply the bank with audited balance sheets regarding the business, together with the auditor's proof of income. Copies of your personal banking account will also be required, to verify regular deposits.

The loan process for self-employed people varies on a number of factors. How much money you have available, the type of business you're in, and how you pay yourself might affect your loan status. Many complex issues are involved; your best bet is to make an appointment to visit your Bond Originator in person to determine your ability to get a bond that you want.

See the article on Finance for the Self Employed
 

3. How much deposit will I need?                                                                                                     Property Network NavigationTop
 
This varies from client to client, bank to bank and depends what amount is being applied for. It varies from 5% to 20% on an average home, but at the moment in South Africa, all banks are once again offering 100% bonds. Do not however bank on this as the majority of bonds granted currently, still require a deposit.
 
Housing costs have increased faster than wages over the past 30 years, so we'll all pay more for our houses in real rands than our parents did. Lenders are aware that housing is more expensive than ever, that most people do not have free cash and have come up with unique programs to help serve buyers.
 

4. What happens to the deposit?                                                                                                       
 
The deposit is paid into the trust account of the agent or the attorney. The Purchaser should stipulate that the interest accrued thereon is to be for his/her own account. Property Network contracts automatically include this clause.
 

5. How is the balance of the purchase price paid?                                                                           Property Network NavigationTop

The balance is usually paid in cash on registration of transfer and will be secured by delivery of acceptable guarantees within a specified time period. The guarantee is an undertaking by a recognised financial institution to pay a specified sum of money on the transfer of the property into the Purchaser's name – the attorneys handle the payment of funds to the seller.
 

6. Is it possible to inflate the purchase price to secure a higher bond?                                          
 
No. This practice is regarded as fraudulent and carries the risk of prosecution. If you require additional funds for home improvements etc and there is enough value in the home, the bank will grant you an additional amount on your bond – or you could apply for an Access Bond.
 
But be upfront with them. Agreeing on a higher selling price and then recovering money form the seller will only land you in trouble

7. Once I find a home, who or what determines the value of the property?
 
Your agent will obviously provide you with a CMA regarding the property and advise you a the whether the price is market related or not. The banks themselves however, will also appoint a valuator who will undertake a valuation on their behalf. This cost is normally charged to the buyer.
 

8. I do not have any credit available. Can I get a home loan?                                                        Property Network NavigationTop
 
Yes, you still can. The bank will consider other factors such as income, stability of work etc in determining your credibility. Having existing credit however just makes it easier for them to assess whether you can manage credit or not.
 

9. What is an Access Bond?                                                                                                          
 
An Access Bond is a normal bond account but one that allows you to draw money out of the bond account as you have paid back. For instance, after a year of repayments, you could re-lend this money, to make home improvements, without having to re-apply for a second bond. It is also ideal for making additional payments, thereby saving on interest and then drawing these funds out again when needed.
 
While this type of account allows greater flexibility the client must be careful to not abuse the facility and remain perpetually in debt on the home, thereby never building up real equity.

One issue to note however, is that since the inception of the new Credit laws and regulations, you will not simply get the Access funds at the drop of a hat anymore. Banks have to now be more stringent about ongoing credit assessment prior to lending.
 

10. When is transfer duty payable?                                                                                                 Property Network NavigationTop
 
This sum is payable to the South African Revenue Service, but is usually collected by the conveyancer. Transfer duty is actually only required to be paid within a period of six months from the date of the transaction to avoid penalties. In practice, the conveyancer calls on the Purchaser to pay the duty soon after receiving conveyancing instructions from the agent, without which they will not proceed.
 

11. What bank is the right one for me?                                                                                          

The one that gives you the best deal. Banks will always try and convince you to do all your business with them – in other words keep all your eggs in one basket. This concept had some merit in days gone by and banking was more personal and your bank manager could consider how much business you bring them
 
In this day and age however, your bond application is decided on by a computer and someone sitting in a distant office. Their parameters are set and they do not view you as an individual. (Do not believe the adverts) For this reason we recommend using a Bond Originator, who has some muscle because of business pushed to the banks and will shop around for you to see what is the best deal available to you.
 

12. I just moved in the past six months. Will that affect my ability to get a loan?

No, not if it was a local move, or really anywhere within South Africa. Sometimes things can get complicated if you moved from another country. In the latter case, you may experience delays due to the difficulty in moving important paperwork over national lines.

13. What do I need to consider if I or my spouse was divorced?                                                      Property Network NavigationTop

As long as your debts are separate and you do not jointly own property, divorce will not be a large hurdle in the application process. You will need to provide evidence of the divorce settlement.
 

14. How does bankruptcy affect my ability to get a loan?                                                               

Currently, after the discharge of debtors in the bankruptcy process, five years of spotless credit is needed to have a clean slate. No late payments, nor judgments, nor collections can exist within a five-year period after bankruptcy is declared.
 
Even then however, be prepared for a long scrutinising look at your situation – particular if a bond was one of the accounts written off in the previous bankruptcy. While lenders, may not according to credit law in SA look at past issues that have been settled, it is good common sense to assume they will take it into consideration
 

15. Will I pay an application fee? What is this fee designed to cover?

Most banks charge what they call a Bond Initiation Fee. This is simply to cover the costs of administration involved in raising a bond. See the costs section for full details.
                                                                                                                                                               
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Back the Finance Advice Centre for all your finance answers
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