15 January 2019: Individuals who cannot afford a home loan on their own should consider co-applying with a partner or family members to increase their chances of qualifying for a bond.
Mpho Ramatong, FNB Home Finance Division Channel Head for Housing Schemes, says lenders do offer consumers an opportunity to apply for a bond with two or more parties. These individuals would co-own the property and share the responsibility to honour monthly home loan installments.
When evaluating joint bond applications, banks adhere to normal credit and affordability assessment criteria. However, the difference is that the profiles of all the co-applicants as well as their combined income is taken into account.
Ramatong shares a few tips for individuals considering to co-apply:
- Good credit record – although you will be applying jointly, it is still essential for all parties involved to ensure that they maintain a good credit record to qualify and get a favourable interest rate.
- Financial discipline – all parties should be financially disciplined when honouring monthly home loan installments. A setback from one individual can potentially compromise all parties, while negatively impacting their credit records.
“Furthermore, the monthly home loan installment has to be debited from one account. Therefore, an agreement will have to be reached on whose account the funds should come from. This particular account should always have funds available on the installment date,” advises Ramatong.
- Alignment of objectives – all parties entering into the agreement must share common objectives to avoid complications.
For example, if you are purchasing a family home, and one member decides to pull out of the bond agreement, a new bond application will have to be processed and a full credit assessment conducted on the application to verify affordability.
- Unforeseen risks – all parties should consider having life and disability cover to ensure that the home is protected should an unforeseen event occur.
Although this is a standard requirement for some banks, it may not be a condition for other lenders. Therefore, the onus is on the applicants to ensure there is cover in place.
“Before taking this important step, it is advisable for all potential co-applicants to seek advice from their bank or an expert to ensure that they are adequately prepared for this commitment,” concludes Ramatong.