WORDS: EDITORIAL TEAM IMAGES: SUPPLIED & SHUTTERSTOCK
BetterBond CEO Charl Coetzee answers some burning questions wannabe homeowners may currently be struggling with.
Q: I don’t know if the company I work for will survive lockdown, so my job may be at risk. Would it be wise to apply for a bond?
A: If you feel uncertain about your employment status, it would be advisable to hang on, rather than incur further debt, until your employment is more stable. The bank needs to feel comfortable that the repayments can be serviced and that you can afford the home loan.
It would not be good lending practice to extend a home loan to someone who is unable to service the debt. However, your home-buying journey does not need to stall entirely. You could still request a prequalification from a bond originator so that you know what you would qualify for, and to allow yourself time to see what develops on the work front.
Q: Can I use my existing bond to help me through the tough times until I’m on my feet again?
A: Yes, if there’s sufficient equity in the property and you’re able to prove affordability and job security, these funds could be used to support you until you’re on your feet again. You could consider refinancing your home loan via one of these options:
- Extending the payment period on your current bond.
- Applying for a second bond.
- Asking for a payment holiday on your existing bond.
- Converting to an access bond if you don’t already have one.
Q: I won’t be able to pay my bond after lockdown for at least six months. What are my options?
A: All major banks and financial institutions have made plans to help individuals and businesses, and to offer financial relief wherever possible. Contact your branch or personal banker for assistance to find out what your alternatives are.
Q: I put an offer in on a house and applied for a bond, which was granted a few days before lockdown. I’m not sure if I will be able to afford the monthly instalment post lockdown. What now?
A: If you applied via a bond originator, they’ll be able to advise and assist you. If you approached your bank directly, contact them as soon as possible to let them know that your financial situation has changed, and request assistance to recalculate affordability. If your financial situation has changed post lockdown, the banks will re-assess affordability and could cancel or decline the original application.
Q: I didn’t have an income for a month and it’s difficult to prove liquidity as an SMME. Will the banks be more lenient post lockdown?
A: Understandably, many SMMEs will be in a similar position due to no turnover during the lockdown. Banks will assess the financial situation of your company and request the latest and most up-to-date financial statements and management accounts, to determine affordability. They will then make an informed decision, based on whether the position of your company and drawings/income will be sufficient to cover the required home loan repayments based on the bond amount that you’re applying for. The policy and decision-making would differ between banks, and they’ll apply their own set of criteria for people who are self-employed. But each bank will assess the application on merit before providing an outcome.
Q: My partner and I can now only qualify for a bond if we apply for a bond together. Is that wise?
A: It’s not unusual for partners to purchase property together and apply for a home loan in joint names. This often improves the chances of affordability and therefore bond approval. Both of you will need to provide all the required documentation – proving income to determine affordability – for the bank to assess whether you jointly qualify.
WORDS FROM THE WISE
The prevailing market conditions – the so-called buyers’ market – are good reasons to not shy away from property investments in the time of Covid-19. A buyers’ market – a situation where the supply of property exceeds the demand for property – bodes well for those looking to purchase property, since prices are generally lower in this type of market.
Our advice is to ensure that you buy at the right price, that your affordability is in order, and that you don’t extend yourself too much when acquiring a new property. Putting down a deposit is always a good idea and might mean that you can get a better interest rate on your bond.
At this stage we must caution against panic, and while we need to take the necessary measures to protect ourselves and our families, we also need to think as rationally as possible about property, and about investments in general.
– Charl Coetzee, CEO, BetterBond
BetterBond is SA’s biggest bond originator, accounting for 28% of all new mortgage bonds registered in the Deeds Office annually.