Banks Are Tightening Home Loans Lending Criteria In South Africa
It is important for all home buyers to know that the banks have all tightened their lending criteria and scorecard during the first quarter of 2022.
According to Home Loan Consultant, Melinda Watkins of We Finance, this means that the property buyers credit scores would need to be a little higher than before and their credit bureau "history" would need to be cleared. Debt that is outstanding or in arrears would need to be sorted out prior to putting pen to paper when making an offer to purchase a property.
When it comes to company's and trusts who is buying property, it can be expected that the bank would require from the client at least a 10% - 15% deposit. If the buyer is clear on the credit bureau, Melinda Watkins is of the opinion that they might even get a higher loan to value approved.
- What is the highest home loan percentages still available from SA banks?
Below are the "costs inclusive home loans" for the following banks:
ABSA - 105% - R1.5m max price - 35yrs age - 20 years - NQF level 8 or higher degree
FNB - 105% - FNB clients only - 1st time home buyer
Nedbank - 105% - less than R1.5m - 1st time home buyer
Standard Bank - 105% - 1st time home buyer - need to be 35 years old - maximum home loan allowed is R1.8million
SA Homeloans (SAHL) - a "transfer assist" is available if affordability of the buyer is in place.
- Government Subsidy:
First time home buyers can qualify for a government subsidy of up to R121 626. Here's what you need to know about FLISP applications:
- FLISP can be used for deposit / transfer costs & bond costs;
- The minimum household income must be R3 501 and not more than R22 000.00.
- 1st time home buyers irrespective of colour - must be a SA citizen;
- Income not to be more than R22 000.00 - inclusive of commission and overtime;
- Sellers need to be aware that buyer who applied for FLISP could delay the registration process.
- The cost for a FLISP application is R1 000.00. This can be arranged via Melinda Watkins and allows for the process to go through faster.
- Alternative Home Financing Model
Sentinel Homes is a new home finance business that offers home finance using an old structure - the instalment sale. This addresses the issue of orphan categories of home finance applicants, such as the self-employed, commission earners, freelancers and foreign nationals, while at the same time being the only alternative to the mortgage bond for home finance. The business has been operating since May 2018 and is a unique presence in the home finance market.
The minimum price is R400 000 to R2 999 999.99. The application is sent to our applications office for consideration. If approved, the process continues to the point where the client moves into his new house and the transfer is registered in the deeds office. Practically, there will be little difference from buying a house with bond finance. The client will live in his home while making monthly finance payments.
Sentinel Homes has a bigger appetite for self-employed applicants, freelancers, commission earners (such as estate agents and other salespeople), contract workers, persons earning foreign income or periodically working abroad, landlords, and other categories of applicant. They also take future rental income into account.
In the case of an instalment sale, the consumer's name will also appear on the title deed as a holder of rights over the property. The difference is that Sentinel Homes is legally the registered owner of the property until the final instalment has been paid.
As long as the instalments are paid in good time and the client continues to comply with his other obligations in terms of the loan agreement, there will be virtually no practical difference from bond finance. The client will make monthly payments and live in his home.
- Client may not be older than 60 years of age
- Maximum loan is 95% for SA Citizens and 90% for foreigners
- 2 day turnaround time
- Offer is valid for 10 days
- Attorneys dealing with the transfers are STBB & Miltons Matsemela only
- DDP Valuators are used for the valuations