What you should know before applying for a homeloan.

What you should know before applying for a homeloan.

The Covid 19 pandemic has drastically changed the landscape of the property market. We’ve seen many an investor come into financial distress due to non-payment of rental by tenants affected. Those tenants remaining in the units, with difficult recourse to evict, on account of the nationwide lockdown. The repayment relief offered by all of the banks will be coming to an end within the next 6 weeks, which will definitely lead to some more properties being dumped into the market. This however is leading to many pundits calling this the best buyers’ market in 35 years, coupled with the severe drop in the prime interest rate.

To illustrate: The banks base affordability on a maximum instalment of 30% of gross income. If you earn R30 000 gross income, prior to the reduction in interest rates, that would have qualified you for a bond of up to R916 000. The reduction in rates has increased that amount to R1 139 000, leaving quite an additional amount for a higher priced property. But please err on the side of caution, as the rates will inevitably go up again.

The banks’ main source of earnings is by lending out money.

  • We saw a conservative stance taken as lockdown started, some of the banks ceasing the acceptance of new applications during the first three weeks of the lockdown.
  • Since then, it has mostly been back to business as usual.
  • However, Nedbank reduced their 100% bonds’ maximum amount to R3m and FNB limited self-employed applicants to 80% loans, and not taking any rental income into consideration.

The banks are definitely still open for business, but they are erring on the side of caution.

  • Be prepared for questions if your payslip shows a TERS payment.
  • Be sure of your cashflows.
  • The best starting point would at all points in time be to consult with an originator to assist you with a pre-qualification, since this will guide you both on affordability ceilings or limitations, as well as, point out any potential niggles that one is better served by acting pro-actively.

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