A Fin24 reader asks:
How much in percentage terms should one pay towards a home
loan (bond) and car repayments, relative to one's basic income?
Pat Lamont, general manager of Nedbank Home Loans, responds:
Each application is assessed according to the individual
risk profile. In general, though, we continue to believe that putting down a
significant deposit is good practice for both the client and the bank.
Therefore, we will continue to encourage clients to do this to get a better interest rate. We encourage clients to base their affordability decision on the prospects of increased interest rates to absorb any economic shocks.
As a general rule, the monthly bond repayment amount may not
exceed the cost to the client's gross monthly income of 30% for home loans and
15% for vehicle finance.
SA Bond Originators believes this means that with a salary
of R20 000 per month, the prospective home buyer can use a maximum monthly sum
of about R6 000 to pay off a home loan. This amount can be increased by
applying jointly with a spouse, friend or family member.
The current prime interest rate plays a big role. The lower
the rates are, the bigger the bond amount will be. Using the above-mentioned
salary example, if interest rates were at 10% the client would qualify for a
bond of about R600 000; if rates were at 15.5%, the client would qualify for a
bond of about R430 000.
Jan Kleynhans, CEO of FNB Home Loans, responds:
FNB considers the customer's total commitment to loan repayments before approving any home loan. Repayments of all loans should not exceed 30% of a customer's salary. Repayments on home loans, vehicle finance, personal and other loans such as study loans are also considered to determine affordability.