More debt may see your bond cancelled

A recent case in the residential property sector of the Western Cape has shown just how powerful the new National Credit Act is and how closely the banks have to adhere to it.

An applicant for a bond valued at R 950,000 was granted this and then signed to buy the home in question.

However, before he could take transfer he went out and bought a new car. This extended his debt to the point where the bank's credit bureau deemed it too high - and they promptly cancelled the bond (as they are entitled to do in these circumstances).

Commenting on this case, Bill Rawson, Chairman of the Rawson Property Group, said that in buying from a private owner there is usually a three to six month delay and any running up of extra credit during that time could lead to a bond being withdrawn.

When it comes to buying off plan from a developer, he said, it can take anything from six to 24 months to take transfer of the property. Here again any overstepping of the credit line during this period could cause the bank to hold back the bond.

'Middle class South Africans should not really complain of living in an age of austerity (as some are doing) because that does not tie in with the facts. We are, however, I believe, learning that at least something about the virtues of focusing on one major purchase (the home) and doing without less important items, certainly in the first five or six years of the bond repayments. This is all to the good and should be encouraged.'

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