In spite of the interest rate being at a 33 year low, banks remain very cautious in terms of granting home loans with all information submitted to them being thoroughly analysed to ensure the applicant’s affordability, says Kim Pistor, legal advisor and conveyancing manager for Rabie Property Group.
Pistor said while it was relatively straight-forward to confirm the monthly earnings of salaried individuals, the same cannot be said for those who are self-employed. “In these cases supporting documentation is a key element to a successful mortgage application with the banks requiring a financial history of the preceding two to three years. “These applications usually take longer to obtain bond approval as they are often initially declined due to the various banks tight criteria related to self-employed individuals. It is often not the client’s own bank who eventually issues an approval and it is for this reason that the services of a mortgage originator are beneficial,” says Pistor.
She said to assist their residential purchasers, Rabie had teamed up with John Savage and Liz Botha of Better Bond who had successfully assisted many of their buyers obtain mortgage finance at the best possible interest rates. “A key bit of advice they give property investors is to check their own credit bureau reports annually as this is a critical part of the assessment process for mortgage lending.”
Pistor points out that interest rates offered by banks can vary by as much as 1% with applicants not necessarily obtaining the best rate from their own bank. “Investors are sometimes disappointed that they are unable to obtain the same rate they were able to get three years ago but with the prime interest rate having been 15% in December 2008 against 9% now, the banks are no longer able to offer the previous average 2% discount on the prescribed interest rates.
“The risk related to the loan now has more of a bearing on the rate discount offered. In addition, a positive credit rating with a deposit of 10% or more on the purchase price of the property will result in a more favorable interest rate than a 100% bond.”