Banks should be ashamed…
I spent some time with clients recently working out what sort of bond they should be able to afford…they had seen a house they liked and wanted to put in an offer (subject to bond approval). Here are the facts:
- Cost price: R850000
- Deposit: R450000
- Bond required: R400000 (maybe a bit more if allowed for some improvements)
- Combined income: R16500 pm (after tax)
Based on the above they should easily have qualified for a bond of R400000 (even at prime, the repayments on a R400k bond would be about R3730 pm and the required income for this should be about R12500 pm).
Armed with this info they set off to their bank as well as to a mortgage originator, fully expecting a positive outcome. “No Ways” they all said in unison..” it’s too risky! We dont like the fact that the wife if self-employed”…and they want signed financials and projected cash flows.
For goodness sake, she is a sole proprietor and does not need signed (audited) financials. Surely her tax returns for the past few years should suffice?
Maybe the banks got burnt from too much reckless lending in the past, but just how much risk is there really in granting a R400000 bond on a property that is currently worth about R850000? Banks should be ashamed of the way that they are treating people. How can we ever expect the economy to grow when this is their attitude?
My advice to them is to approach SA Home Loans (according to their website at least, they should qualify for a R400000 bond with ease, and at a better rate). Perhaps someone at SA Home Loans is interested in new clients and building new relationships because it looks like our banks are not.