'Don't give up on bond application too soon'
Although the ongoing publicity on the National Credit Act and the continued tightening up of the banks' criteria for issuing bonds is to be welcomed in general, it has had the unfortunate effect of deterring many potential home owners from trying to realise their dreams.
This is according to Mike van Alphen, national manager for the Rawson Property Group's bond origination division, Rawson Finance.
"Although Rawson Finance has had a 20 percent increase in the number of bond applications and a 15 percent increase in the rise of approvals this year, we know that many people who could actually qualify for a bond have given up," he says.
"Very often such people have been deterred by a refusal at one bank, but bond originators may be able to help. Bond originators will be able to establish what size bonds they qualify for and, with the help of the credit bureaus, find out what obstacles there may be.
"If they do have tarnished credit records, it is often possible to rectify matters and most bond originators have professional contacts in the credit reinstatement field to whom they can refer applicants.
"Time and again we come across tenants who are paying a very high percentage of their salaries in rent, when they might qualify for mortgage bonds over 20 years, which, with the same or a slightly increased monthly outlay, would have a value of anything from R600 000 to R950 000.
"With prime at a 31-year low of 8.5 percent, and with banks often willing to offer fixed rates for up to five years, this is a good time to be borrowing money."
After talking to a bond originator, he says, the first step should always be to start saving, if only because 100 percent bonds are difficult to come by and banks will look far more favourably on applicants who can put down 10 percent to 15 percent deposits.
"Household debt in South Africa is running at well over 60 percent and all the records show that unsecured debt rises month-by-month. We have to get the message across that, in the long run, it will be far more satisfactory to spend that extra cash on becoming a home owner," says van Alphen.
Weekend Argus (Sunday Edition)