Not many of us can afford the home or investment property of our dreams on one income, which is why more and more people are choosing to apply for joint bonds. Whether you’re one half of a couple, or part of a group of financially-savvy friends, joint bonds can be the key to some great investment opportunities.
Of course, just because there are more of you doesn’t mean you can slack off when it comes to bond application time. According to Ria Venter, Regional Manager for Rawson Finance, polishing your financial profile is just as important for joint bond applicants as it is for individuals.
Here are her tips on improving your chances of approval by making yourself (and your co-applicants) look as good as you possibly can.
Ditch the debt
Debt is one of the first things banks look at when it comes to assessing bond affordability. It doesn’t matter how many applicants there are – any bad debt will count against you. To qualify for the largest bond at the best interest rate, Venter highly recommends getting rid of any unnecessary store cards, credit cards and loan accounts. If you can tighten your belts to pay off things like car loans, even better!
“Ideally, you need as few expenses coming off your bank accounts each month as possible,” says Venter. “This shows the bank that you have sufficient disposable income and that each of you are serious about your financial health.”
Build a strong financial history
Clearing bad debt is important, but Venter says a record of good debt is an equally powerful tool for looking good on your joint bond application.
“Banks like to be able to see that you have a history of paying what you owe timeously and responsibly,” she explains. “A good financial track record really does count in your favour.”
If none of your co-applicants has ever had a loan, store account or credit card before, you may want to consider opening a credit account purely to build a positive history. Of course, it’s important not to fall into the trap of using credit unwisely – keep your eyes on the prize of your home loan and treat any credit facility responsibly.
Put your best foot forward
Chances are, one person’s financial profile will be stronger than the other(s) on a joint home loan application. Whether that’s because of a higher income, better credit record or more stable employment, it makes sense to play up those strengths.
“It’s smart to make the most attractive applicant the primary applicant on your joint home loan,” says Venter. “Think of it as putting your best foot forward to give the banks a good first impression. It’s not going to make up for any serious black marks on other applicant’s records, but can help boost your overall profile enough to encourage lenders to come to the table with their best offer.”
Don’t forget to have a solid agreement in place
Having rock-solid agreements in place to protect all applicants on a joint bond is essential. It may not help you qualify for a home loan, but it will make sure everyone taking part in the investment is on the same page. Venter highly recommends getting a lawyer to assist in drawing up a joint purchase agreement that clearly outlines each person’s buy-in, responsibilities and ownership proportion. Life insurance for each applicant is also a good idea to cover their portion of the costs in the event of their death.
“Just remember, you’ll all be equally liable for your loan in the eyes of the bank, no matter what you agree privately,” she says. “Protect your interests with iron-clad contracts, but also make sure you’re investing alongside people you can trust.”
