The new National Credit Act of South Africa came into affect in 2007, and has compelled the banks to ensure that their mortgage clients do not over extend their credit limit.
Previously, the bond repayments were not to exceed 30% of their proven dependable income. The new act will now make the banks legally responsible for checking the applicant's full credit situation. On bond application, clients will be asked to declare their income as well as their expenses.
With the new act, the banks will have to be fastidious about ensuring that the client has declared all debt, for example car repayments, credit cards, retail accounts and any other debt the client may have; if they have another home loan; or a rental agreement (where applicable) it will also be regarded as a mandatory requirement. Investors who invest in off-plan purchases may find it more difficult to obtain finance if they have mortgages with other financial institutions, thereby making multi-property ownership finance more difficult to secure.
The simple answer to obtaining mortgage finance is to make sure that your finances are in check as this will enable the bank to make a quick assessment of your affordability.
The interesting part about the new act is that if a bank does allow a borrower to over extend on their credit after disclosure of their financial situation, the bank could be sued by the borrower should the debt result in the borrower not being able to repay that debt, as well as incurring a possible fine for contravention of the act. It also works in the bank's favour. Should the disclosure from the borrower not be accurate, the property could be repossessed and the client blacklisted.