How the interest rate cut makes it easier to get a home loan

Home loan experts, ooba have sighted a huge increase in bond applications since the implementation of level three of the lockdown. The recent rate cuts, current buyers market, and great first-time buyer opportunities have encouraged more people to take the leap and secure their property purchases.

This year's repo rate cuts have tremendously lowered commercial banks' prime lending rate to 7%. As a result, the required household disposable income decreased, awarding buyers who previously could not qualify for a home loan a chance at the residential property market.

It is much more affordable to own a home today than it was at the beginning of the year when the prime lending rate was 9.75%. The rate decline has made it easier for homeowners to afford their monthly home loan premiums. In some instances, homeowners are spending lesser on their monthly bond premium than they would on rent. For example, the monthly premium on a bond of R1 million over 20 years was R9 485 in January. Today, with a 7% interest rate the payable premium is R7 753.

Rhys Dyer, CEO of ooba, says: "After extremely low business levels in April and May, we received a flood of home loan applications in June, up 51% compared to June 2019. This high level of activity has continued into July, with volumes in July up over 60% on the same period last year."

Ooba has further revealed that the average purchase price of first-time buyers remains below R1m. This comes as a result of the changes in the 2020 Budget Speech by Finance Minister Tito Mboweni which saw buyers being exempted from paying for any transfer duty costs on properties under R1m. With the new transfer duty threshold, many first-time buyers can save tons of money which can be paid towards their bond or used for renovations in their new home.

How you can apply for a home loan

South Africans are often under the impression that applying for a home loan is a complicated process. With the positive factors enticing homeownership, applying for a home loan has never been more simple.

If you see yourself owning a property in the next few months it would be a great idea to get prequalified for a home loan. This will give you an indication of how much you can afford to spend on a house. It will further save you time when you need to secure your purchase. Use our calculators to get a rough idea of what you will be paying for a home.

Even if you have found the home of your dreams, it is never too late to apply for finance. Applying for a home loan does not have to be a daunting procedure. ooba suggests you need to be 18 years or older, have a good credit record, and have the necessary documents that are required to apply for a home loan.

These are the basic important documents you would need for an application:

• Last three months' salary slips. If you are married in community of property then your spouse's salary slips are also required.
• Last three months' bank statements for your account (and your partner's if applicable).
• Copy of your South African ID document (and your partner's if applicable).
• Statement of your monthly income and expenses.
• Personal assets and liabilities statement.
• Copy of the purchase agreement.

Depending on the scenario, the lender may ask you for other documents as well. With affordable housing and certain FNB clients, based on the bond value, you will also be required to take bond insurance. This will ensure that in the event of your death, dread disease or permanent disability, the outstanding loan amount is settled. If you experience loss of income or temporary disability, the bond instalment is paid for a certain period. While it may seem like just another cost added to your expenses, you can have peace of mind knowing that you and your family will be covered.

Getting a home loan is not as difficult as it was in the past. Chat to one of our friendly agents at Knight Frank Properties today and we will assist you with making your property goals a reality.