MAIN IMAGE: Adrian Goslett, Regional Director, and CEO of RE/MAX of Southern Africa
Staff Writer
Property practitioners do not only sell property, are also required to have a host of knowledge about all aspects of the buying process. In this way the possible sale has a better chance of being successful and the practitioner earning hard fought for income.
In most cases the client will have to apply for a home loan at a financing institution and to qualify for a loan, certain criteria must be met. It is therefore important for property practitioners to be able to advise clients if they will be able to afford a specific property, they are considering buying.
According to bond originator group, ooba, buying a house will usually require you to put down a deposit of 10% to 20% of the purchase price upfront. However, there is the option of acquiring a 100% home loan, which will remove the need to pay a deposit as the loan is funded entirely through monthly repayments.
Prospective buyers can determine what home loan they are likely to qualify for, and what the monthly repayments will be, using a bond calculator. This will help in planning a budget.
Before beginning the house hunting process, it is important to know the minimum monthly earnings required to qualify for the requisite home loan.
“It is always advisable to run through a series of checks to assess whether that dream home is actually affordable,” says Adrian Goslett, Regional Director, and CEO of RE/MAX of Southern Africa.
“The bond that prospective homeowners can afford will depend on several factors, including a buyer’s take-home pay and credit score. Getting pre-approved through a bond originator such as BetterBond is a crucial step towards determining your affordability and the price range of properties you can expect to consider. Once you have determined the right price range, you will not have to waste any time looking at properties that are not within your budget,” he explains.
There are several options available to make qualifying for a home loan in South Africa a reality, rather than a distant dream.
“It is tricky to provide a minimum salary required for a home loan in SA because financial institutions are willing to offer a loan amount that is related to your income. The lower your income, the lower the loan amount for which you can qualify. Your credit score will also play a crucial role in determining how much a bank is willing to lend you. However, as a rule, you should not be spending more than a third of your net monthly income towards your monthly bond repayments,” Goslett advises.
To provide prospective buyers with a very rough idea of minimum earnings for a home loan, it can be helpful to consider what houses cost in each province and what salary you would need to qualify for on a home loan of the same value.
According to BetterBond data July 2022, to qualify for a home loan of equivalent value at the current prime rate of 9%, you will need to earn a gross household income of the following in each province:
- In the Eastern Cape, the average purchase price is R1,048,847 (the most affordable of all the South African provinces), so you will need to earn at least R32,000 per month to afford a home loan of this value.
- In the Western Cape, the average purchase price is R1,778,806 (the most expensive of the provinces), so you will need to earn at least R54,000 per month to afford a home loan of this value.
- In KwaZulu-Natal, the average purchase price is R 1,482,625, so you will need to earn at least R45,000 per month to afford a home loan of this value. *Calculations are based on a 20-year mortgage at the current prime rate of 9%.
Beyond what a buyer can qualify for, Goslett reminds buyers not to forget that the purchase price of the home is not the only cost that you need to consider.
“Not only should you make sure that there is enough room in your monthly budget after living expenses to cover the monthly bond repayments, but it is also important to have saved up enough to afford the other upfront costs that come with purchasing a house, such as the associated bond costs, transfer duties and fees,” says Goslett.
“Buying a house is a smart investment towards your future financial position. It can also be helpful to speak to your local bond originator about the state of the local market so that you know what to expect before you start your house hunting journey,” he concludes.
