HOW MUCH SHOULD YOU EARN TO QUALIFY FOR A HOME LOAN IN SA?

Unless you earned an early inheritance or have been diligently saving for years, applying for a home loan is something you most likely will have to do to buy a house. In South Africa, the bond that prospective homeowners can afford from banks or specialist home loan providers depends on several factors, including things such as your take-home pay, your credit score, and the size of the deposit you’re able to provide upfront. Before you set your heart on your ideal property, it is important to know how much you should be earning to qualify for a home loan in South Africa to cover the costs of that home.

What do I need to qualify for a home loan in South Africa?

It is always advisable to run through a series of checks to assess whether that dream home is actually affordable. Getting pre-approved through a bond originator such as BetterBond is a crucial step towards determining your affordability and the price range of properties you can expect to consider. Once you have determined the right price range, you won’t have to waste any time looking at properties that aren’t within your budget. Before getting pre-qualified, here are some questions that can help you prepare:

• Are you 18 years or older?
• Do you have a South African ID?
• Is your current income stable?
• Is your credit score healthy?
• Have you checked your affordability with a free bond calculator?
• Whether you’re self-employed or a salaried individual, have you prepared all the documentation required for the loan application?
• Note: those who are self-employed will require different documentation from those who have an employer.

What’s the minimum salary required for a home loan in South Africa?

There are a number of options available to make qualifying for a home loan in South Africa a reality, rather than a distant dream. With this in mind, it is tricky to provide a minimum salary required for a home loan in SA because financial institutions are willing to offer a loan amount that is related to your income. The lower your income, the lower the loan amount for which you can qualify. Your credit score will also play a big role in determining how much a bank is willing to lend you. As a general rule, you shouldn’t be spending more than a third of your net monthly income towards your monthly bond repayments.

On average, how much should I earn to afford a home loan?

Again, this is a tricky question to answer. However, to provide you with a very rough idea, it can be helpful to consider what houses cost in each province and what salary you would need to qualify for on a home loan of the same value. According to BetterBond July 2022 data, to qualify for a home loan of equivalent value at the current Prime rate of 9%, you’ll need to earn a gross household income of the following in each province:

• In the Eastern Cape, the average purchase price is R1,048,847 (the most affordable of all the South African provinces), so you’ll need to earn at least R32,000 per month to afford a home loan of this value.
• In the Western Cape, the average purchase price is R1,778,806 (the most expensive of the provinces), so you’ll need to earn at least R54,000 per month to afford a home loan of this value.
• In KwaZulu-Natal, the average purchase price is R 1,482,625, so you’ll need to earn at least R45,000 per month to afford a home loan of this value.

*Calculations are based on a 20-year mortgage at the current prime rate of 9%.

Are there any government grants that can help me?

To help first-time buyers enter the property market, a government-run incentive scheme has been created called the Finance Linked Individual Subsidy Programme (more commonly known as FLISP). All first-time homebuyers who are currently earning between R3,501 to R22,000 can qualify for a small subsidy that can go towards the costs of buying a home.

Can you qualify for a home loan on a single income?

Many young South Africans aspiring to become home buyers believe that owning property on a single income is just not possible. However, according to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, in 2018, there were “over 40 000 single females and over 35 000 single males who have already purchased property across South Africa who will beg to differ”.

What other once-off costs should you consider for a home loan application?

When you are applying for a home loan or even just shopping for homes at various prices, it is easy to forget that the purchase price of your home is not the only cost that you need to consider. Not only should you make sure that there is enough room in your monthly budget after living expenses to cover the monthly bond repayments, but it is also important to have saved up enough to afford the other upfront costs that come with purchasing a house, such as the associated bond costs, transfer duties and fees.

Get the support you need from respected professionals

Buying a house is a smart investment towards your future financial position. However, there are many factors to consider when you apply for a home loan, including your monthly income and expenses. It can also be helpful to speak to your local property professionals about the state of the local market so that you know what to expect before you start your house hunting journey. For the very best property advice, don’t hesitate to contact your local RE/MAX office.

Disclaimer: The purpose of this article is to provide general information and does not constitute professional financial advice. Readers must please seek a professional legal council for actionable advice on this topic. RE/MAX of Southern Africa cannot be held liable for any action taken by the reader of this article.