Ensure your chances of bond approval

While the recession might still be fresh in the minds of some consumers, it appears that more prospective buyers are looking to enter the property market.

The good news for these buyers is that banks have relaxed their lending criteria slightly and bond approval rates have increased, says Adrian Goslett, CEO of RE/MAX of Southern Africa.

During the boom years as many as 80% of all home loan applications were granted. Currently the bond approval rate is around the 50% mark, however, numbers are gradually. The increased number of approvals since the recession period is due to more buyers showing affordability and property pricing coming down to more realistic levels. Mortgage originator, BetterBond, recently noted that the year-on-year the volume of bond transactions that they processed during February 2012 was 63% higher than during the same period in 2011.

Although accessibility to finance is more readily available to buyers, Goslett points out a few things that would-be homeowners can do to ensure they are approved for finance:


Because affordability is such an important element of the bond approval process, it seems that it is the natural place for buyers to address first. A buyer’s affordability is determined by using a simple calculation using the applicant’s gross income, net income and fixed monthly expenses. All these factors will be taken into consideration in order to gain some insight into the buyer’s monthly disposable income. According to the South African credit legislation that governs the practise of mortgage lending, a financial institution may not grant a bond if the monthly repayments are more than one-third of the applicant’s monthly net income. Banks will generally use a repayment to income (RTI) ratio of 30% as well as the available disposable income to work out what amount the applicant will qualify for. The more disposable income available, the more likely the bond will be approved. For a buyer to have the best chance of approval, they will need to reduce debt wherever possible.

Have a deposit:

While it is possible to get a 100% home loan in certain circumstances, the standard requirement is for the applicant to have a minimum of a 10% deposit of the asking price of the home, and in certain cases a deposit of up to 30% may be required.  The lower the percentage of the price that is required to be financed, the more likely it is that the buyer will obtain bond approval.

A favourable credit rating:

Before an applicant is considered, a lender will run credit checks on them to see whether there are any judgements or payment defaults against their name. The credit check will give the lender an idea of where the applicant has credit accounts and how those accounts are managed. Keeping a clean credit record and managing credit accounts well will better the buyer’s chances of approval.

A steady income:

Generally banks require an applicant to have proof of a consistent income over the last three years. Buyers that maintain a good credit rating and show a stable source of income will be looked upon more favourably than those with impaired credit records.


Many South Africans aspire to become entrepreneurs and own a business. Despite their possible earning potential, business owners that are considered to be self-employed are regarded as a higher risk, and, in compliance with the NCA regulations, lenders are more careful when giving loans to people in these positions.

“While more bonds are being granted, it remains up to the buyer to prepare and have everything in order to ensure the best possible chance of a favourable outcome,” Goslett concludes.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 24 Nov 2017
      Demand for secure estate living in Hout Bay has risen sharply in recent years, precipitating a spike in development with estate homes now accounting for 20.24% of the property landscape with the launch of an exclusive new gated development on 26 November adding 20 more units to the existing 1250 estate homes.
    • 24 Nov 2017
      There are some things that money can’t buy – spectacular views from Mouille Point to the V&A Waterfront and a trendy and lively neighbourhood that encapsulates the very best of the Cape Town lifestyle.
    • 24 Nov 2017
      Tshwane’s four-bedroom Mayoral mansion, nestled among ambassadorial residences in the upmarket suburb of Muckleneuk, fetched R5.1 million after spirited bidding at High Street Auctions’ final sale of the year.
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us