Frequently Asked Questions

This answer depends on some variables. The bank will apply an interest rate to the loan and the particular interest rate will have an effect on the loan that is granted by the bank.

Home Loan repayments cannot exceed 30% of an applicant’s monthly salary.

If the loan is granted at the interest rate of 11.0% then the loan repayment is R10.32 for every R1,000 of home loan if the home loan is granted over a 20 year period.

When calculating affordability the banks do not use the lowest rate possible. At the current level of interest rates it is a good “rule of thumb” to assume that an applicant needs to earn a gross salary of R39,050 per month to qualify for a home loan of R 1 million.

The applicant will also need to have sufficient surplus income to easily afford the monthly home loan repayments.

The banks will not agree to granting a home loan if the applicant has a low credit rating, a poor payment profile or a judgement.

It is a good idea for a home buyer to check his / her credit record before applying for a home loan so that he/ she can ensure that the information held by the credit bureau is correct.

In the past banks would accept suretyships, but these days the banks tend to not accept such security. The banks tend to insist that the surety instead buys the property as a co-owner and co-applicant as opposed to signing as a surety.

This does, however, mean that in such a case the property is equally owned by all applicants and is not owned by one person.

All the banks register an additional amount. This is usually 20% or 25% of the bond amount that is being registered to cover the home loan that is being granted.

This extra amount that is registered does not cost the borrower any extra money and the borrower cannot access any extra funds as a result of this additional amount that is registered.

The banks register this additional amount so that they are seen as a preferred creditor should the borrower not be able to repay the home loan and should legal action be taken against the borrower. In such a case the bank is viewed as a preferred creditor relating to the legal fees that were incurred by the bank during the legal process.

The additional amount is in place to protect the lending bank and there is no extra cost that is incurred by the borrower.

A mortgage originator (also known as a bond originator) does not charge for his / her services. The banks pay the originator a finder’s fee for the loan that is granted and accepted by the borrower. This means that there is no financial cost to a home buyer (borrower) when using the services of a mortgage originator.

This is an interesting question and the bank’s answer is probably completely correct although it was perhaps not well communicated.

This situation normally arises when a person is buying a sectional title unit in a sectional title complex. Banks will sometimes have a credit lending policy that restricts the number of units that are bonded to them in a certain complex.

It is possible that the bank had reached this level of exposure in the instance quoted by you and so the bank was not able to agree to the loan that was requested.

This is a good example of just one reason why it is beneficial to use the services of a mortgage originator as, in such an instance, the originator would submit the home loan application to another bank and the borrower would not be placed in a stressful situation.

When being granted a home loan there are two different categories of insurance that might be required by the bank.

The one relates to insurance over the building and is known as “Home Owner’s Insurance”. This insurance is in place to cover the cost of repairs as a result of instances such as damage or theft (eg a gate motor is stolen), damage caused by a burst pipe, the cost to replace a burst water geyser, damage caused by fire or damage to the structure or fixtures and fittings. The insurance policy will normally not cover the cost of repairing damage that was caused by lack of maintenance.

This type of insurance is compulsory and it is beneficial to the borrower and to the lending bank. Imagine having no insurance cover and your house burns down and you still have a large loan to repay!

The other type of insurance that is sometimes required by the bank is life cover.

This category of insurance would generally be taken out to cover the amount of the loan that is in place. It means that if a borrower dies then the life policy settles the loan amount owing.

This type of insurance is beneficial in many instances, but if we think of a husband and wife who have a home and a home loan and one of them dies, then the surviving spouse does not need to worry that the home is no longer affordable and will need to be sold, as the life policy will settle the loan amount owing on the home loan.

The quick response is that home loans over residential properties are sometimes granted for the full purchase price (100%), although 90% loans are more common.

Loans over vacant land are normally for amounts up to 60% of the land purchase price.

Commercial Property Finance loans are normally granted for loan amounts of 70% of the purchase price.

Your own individual circumstances could have an effect on these amounts but the above information is a good general guideline.

Products:
Life policies, local investments, unit trusts, off shore investments, pension preservation funds, provident funds, retirement annuities, disability cover, tax free investments and wills!! These are some of the products and investment choices that are offered.

Certified Financial Planner:
We have an association with a well-established investment brokerage that conducts a full financial analysis for each client and based on the individual responses certain recommendations are made.

Affordability:
The ideal investment and insurance mix is then adjusted to suit the individual requirements and affordability and a sound recommendation is made.

Investments and Insurance:
The selected products are put into place and annual reviews are conducted to ensure that the decisions taken remain relevant and that the investment and retirement planning products are generating the required returns within the acceptable risk profile.

Benefits:
You are able to discuss your current situation and future goals directly with the specialised Certified Financial Planner as opposed to dealing with an unqualified assistant. The most suitable strategy for you is put into place and monitored so that you receive the level of expertise that is required for this category of investment planning.

Yes we can. We can arrange “Bridging Finance” so that you are paid some of the money in advance.

This bridging financed is via reputable lenders and is not at all similar to those loans that are arranged with dubious lenders who have a somewhat sinister reputation when it comes to the repayment of the loan.

Bridging finance can be a most useful product if there is a delay in the receipt of expected funds.

There is information relating to personal details that is required (such as name, address, contact numbers, qualifications, work details, marital status).

This information is generally requested by the originator and is part of the application form.

Besides this information the following is required:

• Copy of South African ID
• The latest three payslips
• If commission or overtime is earned each month then payslips for the past 6 months is required
• Personal bank statements for the past 3 full months showing at least 3 salary deposits
• A signed statement of Personal Assets and liabilities
• A signed statement of monthly Expenditure
• A copy of the Offer to Purchase.

By getting this information together in advance a purchaser will avoid unnecessary delays.

The delay is usually caused because the financial information relating to the business is not up to date and in place.

There is information relating to personal details that is required (such as name, address, contact numbers, qualifications, work details, marital status).

This information is generally requested by the originator and is part of the application form.

Besides this information the following is required:

• A copy of the South African ID
• A letter of Income from the auditor stating the applicant’s monthly income
• In most cases the bank will also request a copy of the latest IT34 tax summary to confirm that the applicant has declared the same level of income to SARS
• Personal bank statements for the past full 3 months
• The CIPC / cipro forms showing the business name, registration number and the name and ID number of the owner
• Audited business financials for the past 3 financial years, signed by an auditor and owner
• Management accounts for the period from the end of the audited financials to two months prior to the application date – signed by the compiler and owner
• The business bank statements for the past 3 full months
• A signed statement of Personal Assets and Liabilities
• A signed statement of Personal Expenditure
• A copy of the Offer to Purchase.

Bond repayments will differ from person to person because the repayment depends on the interest rate that applies to the loan, the term of the loan and also the amount of the loan.

However, most home loans are for a 20 year period.

It is a good “guesstimate” to assume that the loan repayments will be around R11 for every R1,000.

This means that a home loan of R500,000 will attract loan repayments of about R5,500 per month and a loan of R800,000 will attract loan repayments of about R8,800 per month while the monthly repayments on a home loan of R1.2 million will be around R13,200 per month.

This method is, of course, merely an indication of what the monthly repayment will be, but it is an easy and helpful calculation to bear in mind.

If a loan is granted at the Prime interest rate that is 11.0% as from 31st January 2025, then the monthly repayments on a home loan of R1,000,000 over 20 years would actually be R10,320 per month excluding any fees or insurance.

As always, there could be a situation where the correct answer to this question is different to the answer that is the generally accepted best response.

Pay into the loan over your residence:
It would normally be best to pay extra funds into the home loan relating to the property where you stay.

Tax Saving:
This is because a property that is let generates a rental income that is taxable.

For tax purposes, certain expenses can be deducted from this income earned and so the net income earned is lowered and less tax is payable. This tax benefit does generally not apply to a person’s own home, so it would generally be more beneficial to reduce the amount owing on your own home loan before reducing the balance on a home loan relating to a property that is let.

Interest Rates:
It would, of course, also make sense to see the interest rates that apply to the two loans as maybe one loan is at a much higher rate than the other loan. This could influence your decision as to where to deposit the funds.

Check with your auditor:
Generally the home loan over your own residence should be reduced first, but if in doubt, then it is a good idea to ask your auditor / tax assistant how you proceed.

Proven History over many years:
We have an association with a well-established insurance brokerage that is well respected in the industry. Thorough research will be conducted and various insurance policies will be recommended.

Value for Money:
It is, however, important to realise that “Cheaper is not always Better” and some policies are cheaper but offer fewer benefits, or have higher excesses, or have a very poor claims payment history.

If you approach us, we will source a good policy at a competitive premium.

The prime interest rate is currently 11.0%. The prime rate changes from time to time based on the repo rate as announced by the South African Reserve Bank. The prime rate of 11.0% applies from 31st January 2025 until further notice.