select
|

Assets do not necessarily assist in obtaining a bond

One of the common mistakes made by potential home buyers is that they have somehow picked up the idea that if they have substantial assets, e.g. two or more properties, these will qualify them for a mortgage bond.

However, says Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, Rawson Finance, the banks will almost certainly rate the bond applicant not on his assets but on his income.  Bond-free properties can, however, sometimes be used as additional security or as a means of raising the necessary deposit and the legal fees.  The banks will always, says van Alphen, take a very conservative view in examining the income sources and will prove particularly careful if they deem these to be unreliable.

“There are, in fact, no laws stipulating how and when a bank can issue a bond,” said van Alphen.  “It is always their decision as to whether or not to do so.  These days they will be guided by the National Credit Act and it has to be remembered that if they do act irresponsibly and allow a creditor a loan which clearly involves a significant risk they can be heavily penalized for contravening the act.”

Quoting from Consumer Information, the newsletter from the Ombudsman for banking services, van Alphen said that it is essential for the applicant to be completely open about his financial situation.  Any false information or non-disclosure of facts may exonerate the bank from penalties but may well lead to the applicant being prosecuted.

“If a bank rejects an application or accepts it only on very tough conditions, the applicant is free to apply to another bank.  This can, however, be a time consuming and disheartening process which is why a large number of bond applicants opt to work through a bond originator, who will do the necessary research for them and will probably get them the best possible deal.”

Van Alphen commented that there is now a strong suspicion that the interest rates in South Africa will be raised further to control anticipated future inflation.  Some analysts are already saying that the increase by the end of the year could be as much as a further 1%.

“In view of the possibility of this happening, the banks are now likely to be more cautious about bond awards and will factor possible increases into their decision-making.  This, in turn, means that bond applicants must scale down their ambitions if they are to be successful,” said van Alphen.

Work out your monthly bond repayments with our bond calculator


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 22 Jan 2018
      Moving away from the city to a country or coastal town and a slower-paced life is a frequent new-year resolution for South Africans, but thorough research should be done before you break free from the hustle and bustle, because making the wrong move could turn out to be a very expensive mistake, and even more stressful for you and your family than staying in the “big smoke”.
    • 22 Jan 2018
      Cape Town is home to many breathtaking and historic homes, but House Invermark designed in 1969 by South African architect Gilbert Colyn, with inspiration from two modernist icons: the Glass House by Phillip Johnson and Farnsworth House by Ludwig Mies van der Rohe is in a class of its own.
    • 22 Jan 2018
      2017 was a challenging year for the South African property market in general, despite small pockets of thriving activity in areas like the Western Cape. As we head into 2018, Tony Clarke, Managing Director of the Rawson Property Group, casts his eye forward to property trends and market influences that could make their impact felt in the New Year.
    • 19 Jan 2018
      Extending from Randfontein in the west to Roodepoort in the east and including the towns of Krugersdorp and Magaliesburg, the West Rand has a plethora of property available to residents who choose to make this unique area their home.
    • 19 Jan 2018
      When it comes to financial planning, doing the work to ensure you’re prepared for unexpected emergencies is just as important as ticking off your other goals and New Year’s resolutions. The beginning of the year is also the perfect time to review your various insurance policies.
    • 19 Jan 2018
      No surprises at the first Monetary Policy Committee of 2018, as Reserve Bank Governor, Lesetja Kganyago, announced that the interest rates would stay at their current levels.
    • 18 Jan 2018
      The Southern Suburbs make up some of the most popular residential areas in Cape Town, comprising charming groups of suburbs which lie to the south-east of the slopes of Table Mountain. It is seen as the city's most expensive residential neighbourhoods with a choice of various private schools, upmarket eateries, wine estates, beautiful homes and trendy apartments.
    • 18 Jan 2018
      New year, new goals! If you’ve resolved to purchase your first property in 2018, then this 6-step guide from the Rawson Property Group is a must-read. It will help you navigate and simplify what is often be seen as a confusing process of buying your first home – right from the house-hunt to the house-warming.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK