Financial fitness facilitates home loan applications

Homes are usually the biggest assets most consumers will ever acquire in their lifetimes, but the stringent implementation of the National Credit Act by financial institutions is making it more difficult for potential home owners to enter the market.

First time buyers and self-employed people are particularly affected. Nearly 50% of employed bond applicants have their applications declined every month, and about 58% of self-employed applicants cannot secure home loans, according to

Rent2Buy, a new concept for the South African property market, gives potential buyers and property owners an alternative way to buy and sell properties.

“We negotiate agreements between potential buyers and sellers whereby the buyer concludes a rental agreement with a seller with an option to buy the property by a certain date and at an agreed price,” says Meyer de Waal, the founder of Rent2Buy, and a practising attorney and conveyancer.

“The seller is assured of a price for his property in the future, and the buyer pays rent approximately equal to the buyer’s future bond repayment. The buyer can take immediate ownership of the property, and takes over the responsibility of the property – including all rates, taxes, levies and maintenance – which would apply if he was the home owner.

“The idea is that the buyer uses the option period of the contract to prove to the bank that he is creditworthy and can afford the bond repayments,” says De Waal. “This helps the buyer to eventually secure a loan to buy the property. In addition to using the time to save for a deposit, he also shows he can afford the property and be disciplined by paying rent regularly and on time.”

De Waal says the three main reasons why bonds are not being granted are:

The absence of a deposit. Although some banks advertise that 100% bonds are being granted again, the success rate of these applications is low.

A bank would rather decline a loan than take the risk that the client will not be able to service the loan. This causes a major problem for self-employed applicants in particular.

The third reason for declining credit has to do with the applicant’s credit history. Many applicants are not aware of the banks’ sophisticated credit search engines. A judgment against your name or a late payment of an account stops your application. Banks can easily trace this information.

With this in mind, Rent2Buy launched a home owner education programme designed to train and mentor bond applicants to improve their chances of securing a home loan.

The My Budget Fitness programme looks at improving an applicant’s credit rating and financial standing, and essentially puts the applicant on the path to become financially fit for a home loan. Rent2Buy developed the programme in association with Solly Molefe of Setsmol Training.

Molefe says: “The programme assigns personal budget trainers to applicants, and uses innovative software to help home loan applicants track their progress and reach a financially fit state. Through mentorship, education and month-by-month guidance, home loan applicants reach the stage where they really can afford bond repayments and clear their credit records as required under the National Credit Act.”

The programme is available to anyone trying to secure a home loan, and not only for customers of Rent2Buy.

“The aim of My Budget Fitness is to help home loan applicants build up and reach a financially fit state, and to remain that way once they’ve secured their bonds,” says Molefe.

De Waal says potential buyers who start with the My Budget Fitness programme six to 24 months before applying for a loan will improve their chances of securing home loans through the education process. The group aims to ensure that each bond application submitted for a client with a financially fit budget is approved.

Setsmol conducts home ownership education for Absa and FNB, and My Budget Fitness and rent2buy are approved suppliers for Better Bond, oobalink and Bond Choice. My Budget Fitness was recently appointed by AngloGold Ashanti to conduct a budget fitness course for its employee housing programme.

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