Bond Affordability

[marhsava]

Hey Guys,

Not sure if this is the right place to post this but anyways what is the minimum gross salary and credit score you need to qualify for a 1 bar bond?

 

[Thor]

Your bond repayment would be around R10 700 depending on interest rate

You are not allowed to have a bond bigger than 33% of your salary.

Gross Income should be around R32 500

Edit: It is 30% gross, but aim for 20% to be safe.

 

[marhsava]

Your bond repayment would be around R10 700 depending on interest rate

You are not allowed to have a bond bigger than 33% of your salary.

Gross Income should be around R32 500

So I am guessing your credit score only has a influence on your interest rate?

 

[SauRoNZA]

So I am guessing your credit score only has a influence on your interest rate?

Your credit score is ultimately what determines if they say yes or no to you getting the bond and whether a 100% or not.

Interest Rate would be somewhat related to other expenses, banking package, which bank etc.

All of the above is easier/better when you do a joint bond of course. Failing that having a large deposit also helps.

Whatever you do don't forget about transfer fees and duties you'll need to pay out of pocket.

 

[ozziej]

Your credit score isn't the only criteria. Get yourself a free credit report from TransUnion, its easy and gives you an idea if you will have trouble or not.
They also look at the following:
- disposable income is the single biggest factor
So, for example, if you are earning R35 000 a month, take home is about R27500 (without deductions like medical)
They then look at your expenses from that, car payments, groceries, cell phones, petrol, car payments, life insurance, school fees, etc.
They then remove bond repayments (if you are selling) or rent payments (if you are renting) of your current house.
Lets say for arguments sake all of those add up to about R18 000 (ignoring the rent / bond), that means you have about R9500 as disposable income.
That is essentially what you can buy for. R9500 is about enough to buy a place for R950 000 (roughly work on 1% of the purchase price will give you the monthly payments)
It will give you a small amount as a remainder, however, they will probably not give you that much.
You will need to come up generally with a deposit, try and get at least 10%. This will also affect the rate that they offer you. even 0.5% over 20 years makes a huge difference.
They then also look at the following:
- if a joint loan (you and the significant other) they will also look at disposable income, credit score etc
- join loans are a good idea, as it makes it easier to get the loan, however, they do score BOTH of you as individuals. So bad credit records on either of you are a problem.
- also, if you have a lot of POTENTIAL debt, be careful. Don't have a lot of store accounts, big overdrafts or other such potential debt. Add it up, and look at reducing it. Cancel store credit if you don't use it. They evaluate the possibility of you being able to service that debt should you use it.
so, for example, if you have 3 store cards, each with a R10 000 limit, that means you have a POTENTIAL debt of R30 000. can you service that after making all your payments ? (new bond etc) if not, again, likely will get declined the loan.
- Bad debt (not paying) and late payments (remember to check that credit score)
- Number of years in current job (short stays at companies are a red flag, generally under 1 year multiple times is not a good sign)
- number of years in current house (do you move around a lot to dodge creditors ?)

 

[Lupus]

Your bond repayment would be around R10 700 depending on interest rate

You are not allowed to have a bond bigger than 33% of your salary.

Gross Income should be around R32 500

R32 500 gross? That doesn't seem right, as with tax,medical aid, pension scheme and others it would probably drop to R22 000.

 

[Thor]

R32 500 gross? That doesn't seem right, as with tax,medical aid, pension scheme and others it would probably drop to R22 000.

I think it is 33% on gross, perhaps someone can just double check quickly.

 

[Lupus]

I think it is 33% on gross, perhaps someone can just double check quickly.

Hmm interesting thought it was Net

 

[droidx]

Hmm interesting thought it was Net

Think it is gross. Seem to remember this from my purchase 2 years ago.

 

[marco79]

To the best of my knowledge it is 30% of gross. Affordability also plays an important role.

 

[Priapus]

It's definitely 30% gross.

 

[marhsava]

Your credit score isn't the only criteria. Get yourself a free credit report from TransUnion, its easy and gives you an idea if you will have trouble or not.
They also look at the following:
- disposable income is the single biggest factor
So, for example, if you are earning R35 000 a month, take home is about R27500 (without deductions like medical)
They then look at your expenses from that, car payments, groceries, cell phones, petrol, car payments, life insurance, school fees, etc.
They then remove bond repayments (if you are selling) or rent payments (if you are renting) of your current house.
Lets say for arguments sake all of those add up to about R18 000 (ignoring the rent / bond), that means you have about R9500 as disposable income.
That is essentially what you can buy for. R9500 is about enough to buy a place for R950 000 (roughly work on 1% of the purchase price will give you the monthly payments)
It will give you a small amount as a remainder, however, they will probably not give you that much.
You will need to come up generally with a deposit, try and get at least 10%. This will also affect the rate that they offer you. even 0.5% over 20 years makes a huge difference.
They then also look at the following:
- if a joint loan (you and the significant other) they will also look at disposable income, credit score etc
- join loans are a good idea, as it makes it easier to get the loan, however, they do score BOTH of you as individuals. So bad credit records on either of you are a problem.
- also, if you have a lot of POTENTIAL debt, be careful. Don't have a lot of store accounts, big overdrafts or other such potential debt. Add it up, and look at reducing it. Cancel store credit if you don't use it. They evaluate the possibility of you being able to service that debt should you use it.
so, for example, if you have 3 store cards, each with a R10 000 limit, that means you have a POTENTIAL debt of R30 000. can you service that after making all your payments ? (new bond etc) if not, again, likely will get declined the loan.
- Bad debt (not paying) and late payments (remember to check that credit score)
- Number of years in current job (short stays at companies are a red flag, generally under 1 year multiple times is not a good sign)
- number of years in current house (do you move around a lot to dodge creditors ?)

So I got my self a credit report from TransUnion and my credit score was 850 , I am hoping that will get me a 100% bond. The only other debt I have is my credit card and 3 or 4 small accounts.

 

[Boom3laar]

So I got my self a credit report from TransUnion and my credit score was 850 , I am hoping that will get me a 100% bond. The only other debt I have is my credit card and 3 or 4 small accounts.

Ya i wont stress to much, i just got 100% with the exactly same story as you but i had a car financed also so i had a bit more debt than you and i got the same finance as you were looking for.

 

[Tomtomtom]

what is the minimum gross salary and credit score you need to qualify for a 1 bar bond?

This question is backwards! Sort-of like asking "how much do I need to drink to ensure a hangover?"

With the caveat that credit legislation is like a backstop where the barman will stop serving you if you look like you're about to throw up. But who wants to rely on that backstop?

Given your finances and risk appetite and life's plans, how much debt are you willing to take on?

That's the opposite question and the better one IMO. You stay in charge that way.

 

[Toxxyc]

I chatted to a few banks lately. SA Home Loans informed me that while 30% is the max, they generally aim for 20% if you don't have a deposit. Sucks quite a bit, since wife and I now can't really buy (who has R200k for a deposit anymore).

 

[paul5186]

Try for a property around the 900k amount. If I remember right then there are no transfer duties. I think it was raised at the last budget speech.

I managed to get a good interest rate of -1.1% below prime.

 

[marhsava]

Try for a property around the 900k amount. If I remember right then there are no transfer duties. I think it was raised at the last budget speech.

I managed to get a good interest rate of -1.1% below prime.

Yup that's correct, they raised it from 750k to 900k

 

[Greg C]

Your credit score is ultimately what determines if they say yes or no to you getting the bond and whether a 100% or not.

Interest Rate would be somewhat related to other expenses, banking package, which bank etc.

All of the above is easier/better when you do a joint bond of course. Failing that having a large deposit also helps.

Whatever you do don't forget about transfer fees and duties you'll need to pay out of pocket.

So there are a few comments with this post and above that are correct and slightly misleading. So I did a lot of Bonds, share based lending etc credit assessment, now business assessment.

With that being said

The comment regarding 33% of gross is just about spot on
Additions to income ARE EXCLUDED IN THE CALC. Even if you get a travel allowance and fuel allowances it will be excluded as we assumed it to be outside of package, irregular and to be conservative excluded. So remove it when you do the calculation
ITC scorings of around 650 or more as a minimum for application
Credit scoring is more related to behaviour. How do you pay for credit cards and existing debt.
NO MICRO FINANCE. This is seen very negatively so avoid it
Joint bonds are not as favourable only in that it beefs up the overall LTV or value you may both apply for BUT prevents the bond from being transactional in the future in that you wont be going forward able to access equity in the bond if its joint. Its more a backend system as this is prevented as we are not always certain of the status of marriages etc and is a fail safe to prevent risk to the bank.

Interesting notes: Large deposits DO NOT REDUCE RATE. It is in fact the opposite. The larger the bond ie most profitable levels are at 100% finance over 1.5 million and more. When you reduce the LTV you lend, you have far less margin to work with for working with rate. The advice I always gave people was:

Apply for the home, at full value. If approved, have the bond payout, and make a 10% deposit you would have had back into the bond to amortise and affect your rate positively, or have it accessible as equity after it amortises over its period. Ie reduces the longer you leave it in your bond.

The above applies for a car as well and is in effect more strict as it is medium to short term finance, and people live beyond their means.

 

[SauRoNZA]

Didn't mean to say the deposit would give you a lower interest rate rather that it could mean the difference between getting approved or not.

100% on applying for full bond (or vehicle finance) and dumping the money in after.

 

[SauRoNZA]

Try for a property around the 900k amount. If I remember right then there are no transfer duties. I think it was raised at the last budget speech.

I managed to get a good interest rate of -1.1% below prime.

No duties (tax) but still loads of fees.

Those fees being in the 30k and up bracket which is a surprise to most people.