Second Home Loan Implications

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Icarium

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What are the implications (if any) of applying for a home loan if you already have an existing bond on another property?

I currently have a bond that I am paying off on a property where I no longer live myself, but I have family living there so it's not an investment property. Meanwhile the SO and I are looking at getting a place of our own where we will be co applicants. I will be keeping the existing property until such time as the parentals decide to move into a retirement village (or move in with another sibling).

The existing bond is <10% of my gross salary, and we have no intention of applying for the maximum of 30% of our combined gross even though we could afford it.
 
Shouldn't be an issue.

Good luck with your interest rate. "Prime minus" seems to be a thing of the past unless you're on like Investec PB, or have a "perfect" credit record and an existing relationship with the bank.
 
The only thing they do is deduct the outstanding bond from your total affordability. So if you qualify for say 1 bar on the 30% calculation and you still owe 200k on the other house, they will only offer you MAX 800k. I had a sale fall through recently because I did not know this :(
 
heartbroken said:
The only thing they do is deduct the outstanding bond from your total affordability. So if you qualify for say 1 bar on the 30% calculation and you still owe 200k on the other house, they will only offer you MAX 800k. I had a sale fall through recently because I did not know this :(
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So in your case had the other property been a rental with a signed rental contract at least that might have counted towards your income at the very least.
 
toxicehc said:
So in your case had the other property been a rental with a signed rental contract at least that might have counted towards your income at the very least.
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Correct yes, but I am still living in it and wanted to move to something larger and then rent this one out. The bank people could not grasp that concept and fell back to their antiquated formula.
 
No implications other than income vs expenditure.
Also, some banks, depending on where you bank and where you are applying, may give you a lower bond amount because of your first property, meaning you will have to cover a bigger deposit.
SAHL will only give you 80% - 85% if you have another bond.
 
snowwolf said:
No implications other than income vs expenditure.
Also, some banks, depending on where you bank and where you are applying, may give you a lower bond amount because of your first property, meaning you will have to cover a bigger deposit.
SAHL will only give you 80% - 85% if you have another bond.
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This is my main concern. We have the money for a 10% deposit + fees on a R1.5m house now, but if we need to put down a 15-20% deposit it means another few months of saving (Which we're doing anyway since we're putting away what we would be paying on a bond to see just how if affects our finances/lifestyle).

Also I've seen with a few banks that having an existing bond actually negatively impacts the rate they give you. I'm not expecting to match the prime -1.35% I have on my existing property, but I'd hate to be penalised an extra 0.5 ~ 1% on whatever rate I would get because of an existing bond.
 
Icarium said:
This is my main concern. We have the money for a 10% deposit + fees on a R1.5m house now, but if we need to put down a 15-20% deposit it means another few months of saving (Which we're doing anyway since we're putting away what we would be paying on a bond to see just how if affects our finances/lifestyle).

Also I've seen with a few banks that having an existing bond actually negatively impacts the rate they give you. I'm not expecting to match the prime -1.35% I have on my existing property, but I'd hate to be penalised an extra 0.5 ~ 1% on whatever rate I would get because of an existing bond.
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I think the rate really does depend on the bank that you are with, the relationship you have with them and your credit profile. I'd suggest apply to your own bank first, see what they give you, and then go to the others, including SAHL... You can then see who gives the best rate, and try and play them off against each other, within reasonable limits off course.

I'd not go with an originator, they screwed things up twice for us causing 2 deals to fall through... It may be a little trickier in your case though because you don't have a lease/rental income from the property. All worth a try in the end. Just remember to wait a reasonable amount of time between applications to the same bank for a bond as it affects your credit scores.
 
Affordability aside, they will most likely just request up to a 30% deposit. If you've taken an access bond on existing property and are ahead in payments then you might have some of this available...
 
toxicehc said:
So in your case had the other property been a rental with a signed rental contract at least that might have counted towards your income at the very least.
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Yes. It is counted, but banks will only consider 25% of the rental income. Sad but true.
 
In my case I have an investment property and was in the process of applying for a second home loan. My investment property was with the blue bank and I applied my second home loan with them, which got rejected because they say I already have an existing loan with them. The yellow bank ended up giving me 100% bond at prime -0.5%.

I think it all depends which bank you go to.
 
I got prime -2% on my old home. Luckily I have a family friend who is one of the bigshots at finance.
 
Affordability isn't an issue. Even with the existing bond, my combined bond repayments would be < 30% of gross, and well below my current disposable income.

A 30% deposit would be insane though!
 
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