Pay cheque is key to a bond

ACCORDING to statistics from BetterBond Home Loans, South Africa’s biggest mortgage origination group, homebuyers in South Africa now need to earn a gross monthly income of around R30 000 to buy an average home costing some R952 000.

The BetterBond figures also show that 64% of buyers currently have to pay a deposit in order to secure a home loan, and that the average deposit required for a home of R952 000 is around R99 000 or 10,4%.
“This puts the home loan required to buy such a home at R853 000, and the average monthly bond repayment at just over R7 400,” says BetterBond CEO, Shaun Rademeyer.
“Now in the days before the National Credit Act, when the simple rule-of-thumb was that your monthly bond repayment should not exceed 30% of your gross salary, that would have meant that a salary of R24 700 was enough.
“But in terms of the act, banks are obliged to try to stop consumers from becoming overindebted. So when they consider a home loan application, they must now also take into account your existing debt commitments and regular monthly expenses and see if there is enough disposable income left over to comfortably cover the monthly bond repayment.
“And because of the high household debt levels in this country, and the continually rising cost of food, transport, utilities, health care and education, most prospective homebuyers need to have higher earnings now in order to ensure there will be a big enough amount ‘free and clear’ every month to cover their bond instalment,” says Rademeyer.
Banks’ still-strict lending criteria does not appear to have put much of a damper on the demand for home finance, or in fact, on the banks’ willingness to lend to qualifying applicants.