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Cape Town - Although fewer small business owners apply for home loans, their average mortgage size is over 40% more than their salaried counterparts, the latest FNB home loans quarterly report showed.
In the height of the property boom in 2007, around 24% of new home loan applications were received from applicants who generate income from their own businesses, said Ewald Kellerman, head of sales, FNB home loans.
Such applications where “self-employed” individuals are party to the proposed loan have proportionately halved to just over 12% of new applications submitted in recent years.
This indicates a significant change in the home loans environment and could be seen as a furter indication of the financial strain that small businesses have undergone since the 2008 recession, according to Kellerman.
However, even though the number of home loan applications for self-employed applicants are decreasing, the average bond size of these applications are more than 40% higher than that of their salaried counterparts on average.
"This suggests that there is a favourable upside and a healthy risk/return trade-off for potential homeowners, who decide to leave the confines of employment to generate income out of their own businesses," said Kellerman.
"Assessing a self-employed individual for home finance is, however, significantly different and much more complex than assessing a salaried individual for the same loan," he added.
- Fin24
In the height of the property boom in 2007, around 24% of new home loan applications were received from applicants who generate income from their own businesses, said Ewald Kellerman, head of sales, FNB home loans.
Such applications where “self-employed” individuals are party to the proposed loan have proportionately halved to just over 12% of new applications submitted in recent years.
This indicates a significant change in the home loans environment and could be seen as a furter indication of the financial strain that small businesses have undergone since the 2008 recession, according to Kellerman.
However, even though the number of home loan applications for self-employed applicants are decreasing, the average bond size of these applications are more than 40% higher than that of their salaried counterparts on average.
"This suggests that there is a favourable upside and a healthy risk/return trade-off for potential homeowners, who decide to leave the confines of employment to generate income out of their own businesses," said Kellerman.
"Assessing a self-employed individual for home finance is, however, significantly different and much more complex than assessing a salaried individual for the same loan," he added.
- Fin24
