Bond disclosure
The new National Credit Act is bound to make life more difficult for bond applicants — so what exactly do you have to disclose before you are considered for a bond?

The National Credit Act requires banks to conduct more thorough financial checks, including monthly expenditure enquiries, before approving bonds. This is in addition to the stipulation that homebuyers need to earn three times their monthly mortgage repayment.

Put in simple terms, the new act insists on full disclosure of all income and liabilities, says Lanice Steward, MD of Anne Porter Knight Frank.

Previously, these facts could be glossed over or ignored provided that a satisfactory income statement was produced.

No more secrets

Those applying for a bond now will have to produce evidence of their last three months earnings (if they are employed) or their last six months (if they are self-employed).

On the debt side if you are applying for a home loan you will have to reveal what credit cards you own, what the limit on these are and at what rate you are repaying outstanding debts.

Furthermore, you have to relay what department store and other accounts you have and how quickly these will be repaid.

They will also want to know what other home loans you might have incurred and again, at what rate these are being repaid.

Next on the list is how much you outlay each month for services, domestic help, clubs, travel plans and the like.

If you already own property you will have to detail what rates, taxes, water, electricity and maintenance you are obliged to pay on your existing properties.

To avoid delays and frustration be aware of all information required before you approach the bank.

Safe and sound?

But not only will you have to be financially sound, you will need to be earning three times your monthly mortgage repayment.

If the your financial situation is sound, the bond award will then be made on your disposable income. For example, if the interest rate is 11.5 percent, a factor of 10.66 on the disposable income will be applied to determine the amount of the loan.

"Supposing you have an income of R10 000 per month and your monthly expenses are R7000, you would then only qualify for a bond of R280 000," says Steward.

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