‘Which bank offers the best home loan?’ – this is the most posed question when someone performs a Google search. The answer is not as simple as declaring one of South Africa’s most recognized banks.
Tess Rodrigues of Property Factor, a mortgage originator company of nineteen years, says that although a home loan is a straightforward product to finance, the banks’ credit criteria is determining who qualifies which differs quite substantially.
Tess believes the best way to demonstrate this is with a table of variables:
The table demonstrates that if you earn commission, receive overtime, rental income, or maintenance (and depending on which bank you approach) you can either afford to purchase a home or not.
Furthermore, a thirty-year home loan will help you to qualify for a higher home loan amount on the same income or offer you a reduced monthly instalment on the same loan amount as a twenty-year home loan. This is a fundamental component in determining your affordability, considering that your monthly instalment should not be more than 30% of your income.
Yet not all banks offer thirty-year home loans. Some banks will tell you that they only use the 30% repayment to income ratio as a guideline. Rodrigues counters: “We beg to differ, in our nineteen-year experience, the banks apply this percentage quite stringently.”
“It is imperative that self-employed individuals use the service of a mortgage originator with an accounting background or experience”, says Rodrigues.
The financial statements of a business are factual and should not be open to interpretation, but unfortunately, they are. As an example, some banks will correctly see depreciation as a non-cash flow or journal entry, while other banks apply this expense strictly as loss of income. The varied outcomes on assessing self-employed persons are as extensive as the transactions on a balance sheet.
But even if your home loan application is not affected by any of the above variations, you must contend with the banks’ current appetite for risk, how each of them ‘scores’ your application and their exposure to an area or complex in which you are buying. All these factors will affect your success rate, the interest rate they will offer you and whether a deposit will be required.
Rodrigues believes that one of the most critical differences between the banks is the flexi or access facility. However, not all home loans offer this facility: “It is a non-negotiable must-have! The only time that I will recommend you let this one go is when it compromises your ability to get the required home loan and to purchase a property. Otherwise, always ensure that it forms part of the terms and conditions of your final quotation.”
If you are looking for the best home loan, ensure that you get a quotation from each bank, not just your own. The easiest way to do this is to use the services of a bond originator who, with one set of documents, one application will approach all the banks simultaneously with one click of a button.
“We will look at what each bank offers you, based on your personal circumstances and individual requirements and relentlessly fight for the best deal on your behalf. When we have all the quotations, we draw a table of the various offers and you choose the deal that works best for you.”
“To answer the question of ‘which bank offers the best home loan?’, we will reciprocate with – what is your current financial position and what matters most to you? And therein lies your answer”.
(The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Property Wheel.)