NEW PURCHASE HOME LOAN

When applying for bond finance, banks will request a credit report to review your payment history and assess how well you’ve managed your accounts. Your credit score, which reflects your repayment behaviour, serves as a key guideline for banks during the evaluation process.

It’s important to obtain a copy of your credit report to ensure your accounts are up-to-date and free from any discrepancies or adverse remarks. If any issues are present, resolve them before submitting your bond application.

For joint applications, both applicants should ensure their credit reports are clear to avoid complications during the assessment.

CREDIT BUREAUS
(You are allowed 1 FREE credit report per year and may require registration with the credit bureau.)
Transunion ITC – https://bit.ly/4fvGI0b

Experian – https://bit.ly/3UYPHyp

When determining how much you qualify for, it’s essential to align it with what you can realistically afford. Factor in potential interest rate increases and the bond term (typically 20–30 years). A simple guideline is to calculate 30% of your gross income (before deductions) as the maximum bond repayment.

The affordability assessment considers your net income (take-home salary) minus current debt repayments and living expenses, leaving a surplus for affordability.

Example:

• Gross Income: R30,000 x 30% = R9,000 (Max bond repayment)
• Net Income: R22,000 – Bond repayment (R9,000) – Debt (R5,000) – Living expenses (R6,000) = R2,000 surplus

Debt2Bond’s pre-qualification service provides an initial estimate of your financing eligibility, helping you understand your affordability and purchasing power.

Now that you've determined your qualifying price range, it's time to initiate the search.

Consider these key factors:

• Recent selling prices in the area
• Growth in property value over recent years
• Property condition
• Crime rates in the area
• Parking availability
• Security measures
• Proximity to schools and public transport services
• Additional costs for travel and maintenance of recreational areas
• Estimated cost of renovation if the property requires TLC.

TYPES OF PROPERTIES

• Freehold: Freestanding homes, including semi-detached houses. Ownership includes both land and building with a registered ERF number. Property owner is responsible for municipal rates and taxes. 

• Sectional title: Applies to flats/apartments, townhouses, and duplexes. Owners may purchase parking bays or garages under exclusive rights. Property is managed by a body corporate. Maintenance costs are shared among owners through monthly levies, excluding water and electricity.

• Developments (Off-Plan): Buying a property in a sectional title complex or scheme before it is built. In most cases the transfer costs are included in the purchase price, however where the purchase price is higher than R1 100 000, transfer duty is applicable. Customization options may include size, bedrooms, location, design, colour schemes, and fixtures. Some schemes may require a deposit to secure commitment. Protection under the Customer Protection Act ensures developers adhere to chosen specifications.

When discussing a property’s asking price, it’s vital to consider recent market-related sale prices in the area. An estate agent can assist by comparing properties of similar size and features, such as the number of rooms, built-in cupboards, and other amenities. Be sure to inquire how long the property has been on the market and the reason for its sale.

When signing the Offer to Purchase or Deed of Sale, you can negotiate the inclusion of specific conditions, such as repairs or replacements for damaged items like windows, door handles, or other fixtures. These agreed-upon conditions must be fulfilled before the bond is registered. Additionally, you may request certain fixtures—such as light fittings, curtain rails, blinds, or kitchen appliances (e.g., hob and oven)—be included in the sale, ensuring these items are clearly listed in the Offer to Purchase.

It’s important to remember that many properties are sold under a “voetstoots” clause, meaning they are sold “as is.” This clause protects the seller from liability for defects unless they were deliberately concealed. Therefore, buyers are encouraged to inspect the property thoroughly, identify any issues, and address them in the agreement before finalizing the sale.

• Pre-Qualification: Obtaining a pre-qualification or pre-approval helps reduce the seller’s waiting period for buyer approval and provides a guideline for your creditworthiness and affordability. DEBT2BOND can assist you with this process. 

• Occupational Rent: If you wish to move into the property before the transfer is finalized, you may be required to pay occupational rent. The negotiated amount will be specified in the Offer to Purchase.

• Conditional Sale Based on Selling Your: If you have an existing property to sell, the Offer to Purchase can include a clause stating that the agreement is subject to the sale of your current property. In most cases, both the sale of your existing property and the registration of the new one will happen simultaneously.

• Latent Defects: Latent defects are hidden flaws that may not be immediately visible, such as dampness, leaking roofs, faulty geysers, or internal plumbing issues. If you suspect any issues, it’s advisable to hire a professional inspector. Sellers are obligated to disclose any latent defects to avoid future liability. Listing known defects in the sale agreement is a best practice for both parties.

• Patent Defects: Patent defects are visible issues, such as wall cracks, broken windows, or damaged gutters. These should be noted during your property viewing and addressed in the Offer to Purchase if they raise concerns.

When you register a mortgage bond (home loan) with the bank, an initiation fee is applicable. 

This fee can either be included in your bond amount or paid in cash.

The mortgage bond process involves two sets of attorneys:

• Transferring attorneys handle the transfer of the property from the seller's name into your name.
• Registering attorneys manage the registration of your bond in favour of the bank.

Both sets of attorneys charge fees for transfer costs (based on the property value/purchase price) and registration costs (based on the approved bond amount).

First-time home buyers may qualify for a 105 - 108% bond from certain banks, which includes a portion of the registration costs. However, this is subject to affordability and credit assessment by the bank & only available to 1st time homeowners.

The cost relevant to the purchase of a property are as follows:

• Registration costs:  This is a fee charged by the banks nominated attorneys to attend to the registration of your bond.  Subject to affordability – the registration costs or part thereof may be included in the bond amount and paid to the attorneys on date of registration. Certain banks may consider +105% loan amount to accommodate the registration costs, however, this will be applicable to 1st time homeowners only.

• Bank’s initiation costs: The bank will include the initiation cost in the bond amount which is a fee charged by the bank to process your home loan application. This fee may be included in the total bond amount, or you may opt to pay it separately.

• Transfer costs: This is a fee charged by the nominated attorneys who attends to the transfer of the property into your name. The seller is represented by the transferring attorneys and is usually stipulated in the offer to purchase/Deed of sale.

• Transfer Duty: Transfer duty paid to SARS (properties sold for less than R1 210 000 are exempt from transfer duty). 

• Deposit: DEBT2BOND will always apply for 100% bond where NO DEPOSIT will be required, however, dependent on the type of application, the financial institutions may request a certain percentage to be paid by the client (This percentage determines the deposit required).

• Deeds Office registry Fee: Deeds office fees payable to the Deeds Registry for registration of the deed of transfer.

• Post, petties FICA other fees: Post & Petties cover expenses, FICA fees, payable to the transfer attorney to cover expenses for the verification process of the parties in terms of the Financial Intelligence Centre ACT. Deeds office search fees to cover expenses for electronic searches at the Deeds registry and for copies of title deeds.

• Pro-rata municipal rates & Taxes or levies: Fees payable to the seller for the period from the date of registration till the end of the last month for which the clearance certificate was issued- which amount was paid by the seller in advance. 

• FIRST HOUSING FINANCE (Formally known as FLISP) First Home Finance was developed by the Department of Human Settlements to enable sustainable and affordable first-time homeownership opportunities to South African citizens and legal permanent residents earning between R3,501 and R22,000 per month, (the ‘affordable’ or ‘gap’ market). Individuals in these salary bands generally find it hard to qualify for housing finance; their income is regarded as low for mortgage finance, but too high to qualify for the government free-basic house. For more information https://www.nhfc.co.za/finance-solutions/first-home-finance/

A signed copy of the Offer to Purchase is necessary to process your home loan application, along with the following documents based on your applicant type:

Employed Individual(s)

(Applicable to both applicants in joint applications)

• Completed and signed DEBT2BOND HOME LOAN Application Form,
• Copy of ID(s),
• Last 3 months’ payslips (6 months’ payslips required if earning regular overtime or commission),
• Last 3 months’ bank statements 
• Rental Agreement (if additional income is earned, rental income must be paid into a bank account)

Self-Employed/Business Owners

• Completed and signed DEBT2BOND HOME LOAN Application Form, 
• Proof of income: Letter of Drawings from an Accountant (for all applicable applicants),
• Latest 3 months’ personal bank statements (for all applicable applicants),
• Personal Assets & Liabilities Statement,
• Latest 6 months’ business account bank statements,
• Latest 2 years’ Annual Financial Statements,
• If Annual Financial Statements are older than 6 months, Current Management Accounts (not older than 2 months) signed by both the applicant and accountant must be provided alongside the Annual Financial Statements,
• Copy of ID document(s) (for all applicable applicants),
• Copy of Registration Documents or Trust Deed (for Trusts).

Bond Approval and Interest Rate Options

Once the bank approves your home loan based on credit criteria, affordability, and property value, a Final Approval is issued. This document outlines the bond conditions, including:

• Approved bond amount
• Interest rate
• Bond term
• Monthly repayment amount

The repayment includes additional costs such as:

• Monthly service fee
• Homeowners Insurance
• Life Protection Assurance (if applicable)

The total cost of credit is detailed, which includes the loan amount, interest fees, charges, and initiation cost.

Types of Interest Rates

• Variable Interest Rate: This is the most common rate offered unless a fixed rate is specifically requested. It is tied to the South African Prime Interest Rate. For SA Home Loans, rates are linked to the Johannesburg Interbank Agreed Rate (Jibar), which fluctuates over 3-month periods. The Jibar rate is typically 3.5% below the prime rate, with an added Link Rate determined by your risk profile.

• Fixed Interest Rate: You may only apply for the fixed rate option after registration. It is offered for a specified term, this rate remains unchanged, providing protection against interest rate increases. While your monthly payment stays consistent, you won't benefit from rate decreases, and fixed rates are often higher than variable rates at the time of application.