Lenders will take the following into account with every mortgage application.

INCOME

When applying for a mortgage, lenders will look at your total income before any deductions (gross income) to access if you would be able to afford the mortgage payments. Lenders will consider the following as income:

-Salaries & Wages
-Regular Incentives
-Investment Income
-Retirement Income
-Regular Commissions
-Rental Income

CREDIT HISTORY

To qualify for a mortgage it is vital that you a satisfactory record of paying all your accounts on time. This can affect your credit score substantially. A credit score is a summary of a number of positive and negative factors, such as the information on your credit report that aims to predict how likely you are to honor your credit commitments in future. This rating is often used by lenders to identify the risk in offering you credit.

If you experienced problems in the past, and if you have a good explanation it can be taken into account. Make use of an experienced mortgage broker to assist you when applying for a mortgage.

TOTAL DEBT

The amount of debt you have will play a significant role in qualifying for a mortgage. Most South Africans have debt in the form credit cards, store cards, personal loans etc. As a rule of thumb lenders require that the total off all your monthly debt payments may not exceed 80%-85% (depending on the lender) of your nett income.

MORTGAGE QUALIFICATION CRITERIA

Before the introduction of the New Credit Act (NCA) lenders used the 30% rule as qualifying criteria. Now, after implementation on 1 June 2007, you have to qualify on affordability. In other words, they will look at your NETT salary, and deduct all your monthly expenses to ensure you can still afford this amount.

If you already own property and would like to apply for additional finance on your home loan, the same rule applies. One advantage, though, is if you will be consolidating debt, because some banks will take into account the debt you will be settling and looking at your improved cash flow when calculating your affordability.

PROPERTY VALUATION

Your lender will do a valuation on the home to determine its value, before granting a mortgage.

The value of the property must be in line with the purchase price. If this is not the case, the bank may approve a lower bond amount.

If you're already own property and would like to apply for additional finance on your home loan, you need to have sufficient equity in the property to qualify. Equity is calculated by taking the market value of the property and deducting what you owe. This difference is the equity. In certain suburbs the banks will allow you to apply up to the full value of the property.

For more information see the following money saving articles below
- Recognizing a Bad Mortgage Loan
- How to Afford a Mortgage Bond
- Debt-Free Living
- Are Debts Keeping You Up At Night?
- Good Debt vs Bad Debt
- Budgeting – It Has to be Done Otherwise You’re Sunk!

To apply for a loan you will have to fill out a short application form. You will then receive a FREE quote from well established, nationally recognized lenders. You do not need to decide now whether the loan is for you.

Just apply and compare the repayments to your current situation. There is no obligation on your part. If you decide that it is not for you, you simply do not have to accept the offer. You have nothing to lose and everything to gain.

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