5 Questions to Ask Before Applying for Your First Home Loan

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40%
Around 40% of home loans in South Africa are 100% bonds.

66%
Banks currently decline around 66% of home loan applications

30%
For most home owners, bond repayments make up over 30% of their monthly expenses.

Am I ready to commit to purchasing my first home?

This is possibly the most important question to ask yourself before making a commitment for the next 20 years or more.

Individuals in a secure job earning a regular salary have a clear idea of where their money is allocated and whether they are able to afford to purchase a home. However, if you are self-employed, your income may be unpredictable, making it more difficult to know for certain whether you are in a position to purchase.

It is also important to take into account the costs and fees associated with purchasing your new property. You’ll need to have money saved to place a deposit on the home, money allocated for transfer duties and fees and you’ll also have to consider moving costs, home-owners’ insurance and rates on your property.

What is my credit score?

A favourable credit score and clean credit record are valuable assets when applying for a home loan. Each year consumers can obtain a free credit report from the credit bureaus in SA to assess their financial position.

How much can I afford?

The general rule of thumb is that your monthly home repayments (including the bond, interest, taxes and insurance) should not total more than 30% of your income before taxes.

How can I get the best interest rate?

There are two key factors that you need to have in place. Firstly, having a good credit record will go a long way to proving your creditworthiness. Secondly, the larger your upfront deposit, the more likely banks are to respond with favourable interest rates.

What deposit will I need to put down?

The average cash deposit required by first-time buyers is 12.3% of the purchase price of the property.