Frequently Asked Questions?

Thinking of getting a bond? Have Questions?

How long does it take to clear your name from the credit bureau?

If you fail to pay outstanding debts, credit bureaus will add your name to a blacklist that will make it difficult for you to obtain loans in the future.

Paying off your debt will remove your name from the blacklist. According to TransUnion, one of South Africa’ biggest credit bureaus, this will happen within 7 – 20 days.

When do you start paying your bond?

You will start paying your bond about a month after the bond is registered.

Which specific date of the month your account gets debited can be discussed between you and the bank. The bank should also contact you after the bond is registered to confirm the date of the first payment.

Bond registration usually takes about three months from the day your bond is granted. So three months for bond registration, plus another month until the first payment, means about four months from your bond being granted to the first payment. This gives you time to start setting money aside for the bond payments.

Will my partner’s poor credit score affect our joint home loan application?

Banks are required to comply by the National Credit Act in the granting of credit to applicants, so an impaired credit rating of any of the applicants can affect the outcome of a joint home loan application. The bank’s credit decision will depend on the strength of your information and on how often and how severe the listings are on the credit score of your partner. However, if either of you has been blacklisted or is under a formal rehabilitation programme, the banks will not approve the loan as a joint application.

Learn more about the credit score you need to buy a house, and how to find out what your credit score is.

How long does home loan approval in principle take?

Usually, home loan applications are approved in principle within a couple of days, as long as all of the necessary documentation has been sent to your home loan comparison service.

Would I qualify for a home loan if I have a poor credit score?

Banks require a clear credit record before they will consider approving your home loan application. However a good credit record can’t be achieved overnight. If you are considering buying a house, you should do what you can right away to improve your score. The best way to be financially fit is to pay your bills on time and in full. It’s simple really: to ensure a good credit record, don’t get into more debt than you can afford, and then make sure you pay it all back.

Can I, as a South African citizen, buy a property in SA from overseas?

Yes, you absolutely can. As a South African citizen living and working abroad, bank criteria dependant, you are entitled to between 50% and 80% home loan finance. You would need to supply all the required documentation for a home loan application and undergo the credit assessment set out by the banks. You are now able to complete your home loan application online and submit and sign all documentation electronically.

What do the banks look at when considering my home loan application?

The first thing the banks will do is review your credit score. Then they will look at your income and expenses to gauge your ability to repay the monthly home loan installments. They will also take the size of your deposit (if you have one) into account.

What is the current prime interest rate in South Africa?

The current prime interest rate is 9%, as of July 2022.

The SARB (South African Reserve Bank) controls the repo rate (repurchase rate); the rate at which SARB lends to South African banks. This in turn determines the prime interest rate, and then the rate at which banks will lend to its customers.

The prime interest rate is the repo rate plus the amount added by the bank in order to ensure they make a profit on their loans.

What is a bond originator, and why should I use one?

A bond originator can be very valuable to those looking to purchase their dream home, or invest in property, with a home loan. Their objective is to get you the best home loan deal by applying to multiple banks on your behalf, so you can compare which ones offer the best rates, terms and loan amount. Bond originators are paid a commission by the bank, so their service is free.

How do I clear my name from the credit bureau in South Africa?

If you are unable to pay off debts, your name will be flagged by the credit bureau, and added to a blacklist; and it will be more difficult for you to get loans in the future.

The simplest way to clear your name from the credit bureau is to pay off the debt. According to TransUnion, one of South Africa’ biggest credit bureaus, this will usually result in your name being removed from the blacklist within 7 – 20 days.

You can also request that your creditor write to the credit bureau to notify them that the debt has been paid, and that they can remove your name from the list, although your creditor is not obligated to do this.

If you are struggling to pay off debts, you should consider going into debt counseling.

If you are concerned about the prospect of being blacklisted, you can check your credit record to see what your standing is.

Can we apply for a joint bond if we’re not married?

You can apply for a bond with anyone you choose: a partner, (even if you’re not married), a friend, or with one or multiple family members. Just make sure you have a legal agreement drawn up between the parties in question to protect all of your interests.

What is a good credit score if I want to apply for a home loan?

Generally speaking, a score of 600+ will give you a fair chance of home loan approval. The better your credit score, the higher your chance of approval, and the more likely you are to get a better interest rate.

When do you pay bond registration fees?

Bond registration is a once-off fee that you pay before the bond is registered. The bank appoints a conveyancing attorney to register your bond after the home loan is granted, and the bond registration fees are paid to this attorney. The registration process usually takes six to eight weeks.

Will a pre-qualification improve my chances of getting bond approval?

Over 90% of applicants who get pre-qualified, get approved for a home loan. A pre-qualification certificate gives you an accurate idea of what you can realistically afford, along with your credit score. This means you can shop for a home within the right price range, improving your chances of successfully qualifying for a home loan.

Can you get denied after pre-approval?

A home loan can be declined even if you have been pre-approved. For example, if the applicant’s financial situation has changed since they obtained pre-approval or the lender does not find the property to be suitable security for the loan amount applied for.

That said, pre-approval still significantly increases your chances of success in your home loan application. In fact, just over 90% of home loan applicants have their home loan applications granted.

Will a deposit get me a better rate on a home loan?

Yes, the higher your deposit, the less risk you are for the bank. A higher deposit improves your chances of securing a more favourable interest rate on a home loan.

What is a good interest rate on a home loan?

The only way to know if you were offered a good rate is to have quotes from multiple banks to compare. In addition, having multiple quotes gives you bargaining power.

Does pre-approved mean approved?

Being pre-approved doesn’t mean you’re approved. It means you have an idea of what you would likely qualify for.

The pre-approval process takes into account your credit score and determines the size of the home loan you would qualify for.

It does, however, provide proof you can afford the amount for which you’ve prequalfied. This proof can be useful when dealing with the property seller.

It also helps with your house hunt, as you know the price bracket you should be looking at if you want to improve your chance of home loan approval.

Do I need a large deposit to get a home loan?

No, banks are granting home loans with lower deposits, and even home loans with a zero deposit in some cases. The value of a deposit is that it reduces your monthly bond repayments, and decreases the interest paid to the bank over the term of the loan. You will also more likely to get a better interest rate with a deposit.

Why is a credit score important when applying for a home loan?

Your credit score indicates to your bank whether your past debt repayment behaviour will make you a good risk or not. Through various calculations based on your transactional records, the credit bureau will provide your bank with a three-digit number ranging between 0 and 999. Naturally, the higher the better, and a high credit score rating is one of the most valuable personal finance assets you can have.

Generally speaking, a score of 600+ will give you a fair chance of home loan approval. Although this may vary according to which bank you use. Each bank uses both the credit bureau score and their own internal risk assessment criteria which looks at a number of factors specific to a particular home loan application, such as the loan size compared to the property value (zero deposit is considered higher risk). If you are classified as very high risk, the chances are you won’t be successful in your home loan application as the banks will question your ability to pay them back. A good to excellent credit score will have the opposite effect, possibly opening the way for you to negotiate preferential terms and interest rates.

Can you get a home loan for more than the purchase price for renovations?

You can apply for a home loan higher than the value of the property, although in the case where the loan is intended to cover the cost of home renovations, you may be required by the bank to provide proof of building plans.

Another example of a home loan at more than the value of the property is the 105% home loan, which covers the cost of transfer of property, and bond registration.

Which is better, a fixed or variable home loan interest rate?

If you are working on a tight monthly budget, you might want to consider fixing your interest rate to avoid fluctuating bond repayments. However, fixed rates are usually higher than variable rates, meaning you’ll have to pay more in interest over the term of the loan.

Can I get a 100% home loan?

Banks are granting home loans without a deposit. The banks will review your credit history, your ability to repay the home loan, and the value of the property to determine if you qualify.

Can I borrow against my house to buy another house?

Yes, you can use your home equity to finance a new home purchase. And it’s an effective, low-cost way of funding a home loan.

Home equity is the difference between the value of the home and what you owe on the home loan. You can apply for a new home loan and use your home equity to fund it. The new home loan will have its own interest rate, either fixed or variable.

Frequently Asked Questions?

Thinking of getting a bond? Have Questions?

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