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,
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
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