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08 Jan 2013

Aspirant homeowners need to save more towards a deposit to avoid the disappointment of home loan applications being declined or banks giving less than hoped for.

“The message we are getting from the banks is that provided, in the first place, the client’s income and expenditure figures show that he can afford the house he wishes to buy, his chances of being given the bond are immeasurably improved if he puts down a deposit. Furthermore, if this can be 15 or 20% rather than the more usual 10%, that too can increase his ability to qualify for a loan.”

Bond origination service, Rawson Finance reported a busy December 2012 season, with turnover for the period up to 21 December 20% up on that of the same period in 2011, according to Mike van Alphen, National Manager of Rawson Finance.

This, van Alphen believes, reflects a slow but clearly discernible uptick in the residential property sector which has now been evident for some months.

However, says van Alphen, it is still a cause of serious concern to him that some 50% of all applicants are applying for 100% bonds – and 75% of these are being turned down or a lower offer is being made by the banks.

“The message we are getting from the banks is that provided, in the first place, the client’s income and expenditure figures show that he can afford the house he wishes to buy, his chances of being given the bond are immeasurably improved if he puts down a deposit.

"Furthermore, if this can be 15 or 20% rather than the more usual 10%, that too can increase his ability to qualify for a loan.”

Van Alphen says that, while it is wholly understandable that South Africans now paying increasingly high rents often battle to save for a deposit, he has the impression that there is a definite lack of will in this matter.

“One sometimes gets the impression that certain applicants actually believe that they have a right to a 100% bond. The banks, however, will always favour the borrower who, in the event of a default, will lose more than his monthly payments to date, i.e. the payments plus the deposit."

He says the banks, quite rightly, want to see real commitment on the part of the borrower.

Another failing of many bond applicants, says van Alphen, is to neglect to check and clear up unpaid debts before they apply for a bond - not doing this can result in them being blacklisted. Bad debts, he says, will in nine cases out ten show up on the national credit records and will immediately wipe out their chances of being granted a bond.

Those wishing to check their credit status, says van Alphen, should visit www.mytransunion.co.za. "After filling in personal details online (a ten minute exercise) their credit status will be emailed to them within three to four minutes."

Every South African is allowed one free credit check per annum.

“It is essential to make use of this free service before embarking on a credit application because under the National Credit Act rules, tarnished records will not be condoned.” 

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