Extra upfront costs often stymie potential bond applicants
Would-be home buyers in all price brackets are still experiencing considerable difficulties in getting bonds, says Derek Evans, an agent with the Rawson Properties Muizenberg franchise.
In general, these difficulties are encountered most seriously at the lower end of the income scale.
"Bond originators like Betterbond have indicated that in the past three months they have approved 20% more bonds than they did last year. However, it remains true that, while OOBA and others can now claim that some 67% of bonds are being approved, which in OOBA's case is a 2, 5% increase on 2010, in the affordable and township housing, our experience has been that less than 40% of applicants are successful."
Rawson estate agents (and many others) are trained, said Evans, to help buyers assess their chances of getting a bond and in this way they can avoid wasting both the buyers and their own time in the search for homes which they simply will be unable to get the finance for.
However, in today's market he said, many buyers appear to qualify for a bond 'on paper' but are then written off by the bank on their score card for a few late payments or an old debt they knew nothing about.
"We have even had cases where the purchaser had a deposit, but bad debt, and the bank suggested using the deposit to offset the debt and gave the purchaser a100% loan."
Other bond applicants, said Evans, will find that although they qualify - they cannot afford the 4-5% extra upfront cost which has to be paid before the deal can go ahead.
This, said Evans, makes it essential for many people to get a 104% bond, but at the moment these are given only to a very limited number of people, usually people in settled and secure jobs in which they have been employed for a long time. Statistically, bond applications have increased 20% year-on-year, with current approvals hovering at 50%
In many cases, said Evans, Rawson Finance can help a buyer with no savings, by arranging, a personal loan through the banks which will cover the extra costs. This service, he said, is very definitely worth considering but again it depends on the applicant having an unblemished credit record.
Rawson Properties Press Release