In short
South African banks work backwards from your income rather than forwards from the price of the house. The National Credit Act obliges every registered credit provider to prove you can afford the instalment before it advances a cent, so the assessor starts with your gross monthly earnings, strips out tax and statutory deductions, subtracts the debt instalments already on your bureau record and a realistic figure for living costs, then tests what is left against a bond repayment. As a working rule most banks want that repayment to sit no higher than roughly 30 percent of gross income, with all your credit obligations together staying comfortably below a third to 40 percent.
The arithmetic that follows is simple. At a rate near 11 percent over twenty years, every R1 million you borrow costs about R10 300 a month. Turn that around and a household earning R30 000 before deductions is usually looking at a bond somewhere near R850 000 to R900 000, provided the credit record is clean and no vehicle instalment is already eating the budget. Put down a deposit and the figure rises; carry a personal loan and a store card and it falls fast.
Two things catch most first-time buyers out. Your credit record decides whether you are approved and on what margin, while affordability decides how much. And the qualifying amount covers the property only, so transfer duty, attorney fees, bond registration, homeowner's cover and life cover all have to come from somewhere else.
How the sum works
An affordability assessment is arithmetic rather than judgement. The bank takes your gross monthly income, deducts tax, UIF and any other statutory deductions, then subtracts every credit instalment showing on your bureau record - vehicle finance, credit cards, store accounts, personal loans - along with a living-cost figure built from your bank statements and a minimum expense table. What survives is your disposable income, and the bond repayment has to fit inside it with room left over.
That instalment is then converted into a loan amount using the rate the bank is prepared to offer and the term you choose. This is why one salary produces different answers at different banks: the margin above or below prime that each lender quotes shifts the amount by tens of thousands of rand. Self-employed applicants face the same test with different paperwork, usually two years of financials or tax returns plus personal and business statements, and most lenders average that income across the period instead of taking the strongest month.
Bond qualification is affordability plus deposit plus record. Jacob has reviewed the worked examples covering all three.
What an income buys
The table below turns the 30 percent rule into rand figures so you can place yourself on the scale before you speak to a bank. Read it as a starting point rather than a promise: two applicants on the same salary can be quoted very different amounts once credit records, deposits and existing debt enter the picture.
Figures assume a twenty-year term at a rate near 11 percent a year, a bond instalment of 30 percent of gross income, no deposit and no other debt obligations. A rate half a percent lower lifts every amount by roughly four percent, and any existing instalment reduces it by about R97 000 for every R1 000 you already pay each month.
Beyond the bond
The figure a bank qualifies you for is the money it will advance against the property. Everything that gets the property into your name sits outside it, and on a R1 million purchase those extras commonly add up to somewhere between R40 000 and R60 000 in cash you have to find yourself.
Transfer duty is payable to SARS on properties above roughly R1,2 million and climbs steeply from there, although it falls away entirely on a newly built home bought from a VAT-registered developer, where the tax is already inside the price. Transfer costs go to the conveyancing attorney appointed by the seller and bond registration costs to the attorney appointed by the bank. Both follow a published tariff, both include Deeds Office fees, and neither can be added to the loan.
On the loan itself the National Credit Act allows a once-off initiation fee and a monthly service fee, and most banks will capitalise the initiation fee if you ask. You will also need homeowner's cover on the structure for as long as the bond runs, and usually life cover ceded to the lender. Then come the running costs nobody asks about at application: municipal rates, water and refuse, levies on a sectional-title property, and maintenance that is now entirely yours. Budget for all of it before you decide how much of your qualifying amount you actually want to use.
Raise the ceiling
None of these are tricks, and none of them work overnight. Each one changes a real input in the bank's calculation, and together they can move a qualifying amount by hundreds of thousands of rand within a few months.
Every instalment on your bureau record is subtracted before the bank works out what a bond can cost.
A store card at R800 a month and a personal loan at R1 500 together cost you roughly R220 000 of qualifying amount at current rates. Settling them is usually the fastest way to move the number, and it lifts your credit score at the same time.
A deposit reduces what you need to borrow and improves the rate the bank is willing to quote.
Ten to twenty percent brings the loan-to-value ratio down, and lenders price lower-risk bonds more keenly. Regular monthly transfers into a savings account also read far better on your statements than one large amount that appears from nowhere in the month before you apply.
Two incomes assessed together usually qualify for considerably more than either applicant would manage alone on the same property.
Both applicants are credit-checked and both are jointly liable for the full instalment, so one weak record can drag the whole application down. Couples married in community of property apply together by default; everyone else should agree upfront who owns which share of the home.
Moving from twenty to thirty years lowers the instalment and lifts the amount a bank will approve.
A thirty-year term buys about eight to ten percent more bond for the same monthly payment, but the interest bill grows substantially across the extra decade. Take the longer term if it gets you into the right property, then pay a little extra every month to shorten it again.
Approval and the margin you are quoted both hang on what the credit bureaus say about you today.
You are entitled to one free report a year from every registered bureau. Dispute errors, settle defaults, have any judgment rescinded and keep card balances under about a third of their limits for several months before the application goes in, because lenders report monthly.
A prequalification tells you what the market will lend before you fall in love with a house.
It is free, commits you to nothing and makes your offer credible to a seller. When you are ready, put the same amount and the same term to several NCR-licensed lenders and compare the rate, the initiation fee and the total cost of credit rather than the instalment alone.
Key takeaways
If you remember nothing else from this guide, keep these six points in front of you while you work out what you can realistically buy.
Banks work backwards from your income, so the bond instalment must usually fit inside about 30 percent of your gross monthly pay before anything else is even considered
At a rate near 11 percent over twenty years, every R1 million of bond costs roughly R10 300 a month, which is the quickest way to sanity-check any figure you are given
Existing debt is subtracted before the calculation starts, so clearing a vehicle instalment or a store card often lifts your qualifying amount more than a modest raise would
Your credit record decides whether you are approved and at what margin, while the affordability assessment required by the National Credit Act decides how much you can borrow
Transfer duty, attorney fees, bond registration, homeowner's cover and life cover all sit outside the loan, so keep forty to sixty thousand rand aside on a R1 million purchase
Prequalify first and then compare written offers from NCR-licensed lenders on the same amount and term, because half a percent on the rate is worth tens of thousands of rand
Swiftbanker is a free, independent comparison service. Through our partner Myloan.co.za you can put one application in front of NCR-licensed lenders and see what they are willing to offer, at no cost and with no obligation.
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