From 1 June 2007 the National Credit Act (NCA) will replace the Credit Agreements Act, Usury Act and any other legislation that allows for micro lending. Banks are going to have to perform more comprehensive affordability assessments on clients before granting credit and consumers are going to have to prove their financial standings.
An example is that, no longer will the basic concept of affordability of a home loan be that you can afford to pay a loan instalment of 30% of your monthly gross income. The banks will be obliged by law to assess your financial situation in more depth, in terms of your total credit exposure, domestic expenditure and asset value.
But, until then ...
Your risk profile, together with the valuation of the property you wish to purchase, determines the amount of the bond and home loan rate you qualify for. The bank will approve your loan based upon your supporting documentation submitted and on your credit history. A 'Final Grant' is awarded once the property valuation has been completed.
If the following criteria can be met, you are a good candidate for a home loan:
- You are over the age of 21 (or have a legal guardian to sign surety);
- You are a South African Citizen;
- You have been in stable employment for at least 2 years (in the same career stream);
- Your proposed monthly repayment should not exceed 30% of your gross (before tax) monthly income;
Keep in mind the implementation of the National Credit Act in June 2007 - You have a clear credit record;
- You are not an unrehabilitated insolvent;
- The property must be a mortgageable property;
- In the case of purchasing a sectional title unit, the body corporate must be up to date with payments of rates and taxes, and the body corporate should be functional.
Approval of Your Home Loan
A home loan approval can take up to 3 weeks depending on complications that may arise. Registration of a bond can take anything from 6 weeks to 6 months, also depending on what complications may arise.
Your home loan application could be refused if the bank feels that there is a risk involved, or if they are putting themselves in financial jeopardy by granting you a bond.