Home Loans – New Credit Legislation

In The News: Homebuyers and other borrowers can expect much closer scrutiny of their financial affairs before they are granted any home loans or credit in future.

That’s because new credit legislation due to be passed in October this year will put the onus on credit lenders, including banks, retailers and microlenders, to make proper assessments of whether would-be borrowers are in a position to satisfy all their existing credit repayment obligations as well as those on any new loan.

A mortgage originator, for example, will have to take into consideration what a potential borrower might already be paying off on a car, credit card, furniture, retail account, education loan or tax bill, and assess whether the remainder of his income will be sufficient to cover the installment on a home loan as well as necessities.

Any new loan or credit agreement that is made without a proper assessment having been done will be considered “reckless” – and the lender will be liable for any costs. The only exceptions will be cases in which the potential borrower is found to have provided false information.

The new legislation, which is expected to come into effect early next year, is intended to put a stop to unfair lending practices and combat rising levels of over-indebtedness, especially among less-sophisticated borrowers.

It will result in the creation a National Credit Regulator to oversee the lending industry and educate consumers about their rights.

It will also require credit bureaus to be licensed, and to provide potential borrowers with quotes on the cost of their credit that will be binding if a loan is taken up.

Currently, according to the Department of Trade and Industry, dysfunctional credit extends to some 19-million accounts worth a total of R362-billion.

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1 comment on “Home Loans – New Credit Legislation”

  1. my consultant from IBO is trying his best to get a better offer from defferent financial institutions/banks but it seems as if i will end up not been offered the total amount that i need to have for the property that i intend buying. Already he has not been getting full amount that i want to borrow, my worry is that if i don’t get this financial assistance i am going to loose the property i intend to buy. which the amount that i qualify for is R188 000 and the property is R200 000 but i will pay the different to make it R200 000 and for the transfer costs. What qualifies me to be granted the full amount of the bond which R200 000.

    Reply:

    Good Day, Margaret

    With regards to your question about obtaining a 100% home loan, there are a number of options available to you.

    IBO Home Loans has setup relationships with many of the major home loan providers in South Africa, and by using them your home loan application is sent to all these banks.

    These are the bank which IBO will submit your application to: FNB, Nedbank, Standard Bank and Absa Bank.

    Alternative Options:
    1. If you are not able to secure a loan for the full amount then you may also approach other home loan providers personally.
    Standard Chartered Bank – have a very impressive home loan product. For more information about their product and its benefits you can contact Olen Kolbe.
    Email: olen.kolbe@za.standardchartered.com
    Telephone: 0214817654

    2. Apply for a personal loan or overdraft facility to cover the outstanding balance. Remember though, that the interest charged on personal loans and credit cards are often much higher than the interest on your Home Loan

    3. Another option I can suggest is that you try to find someone who could stand surety for the extra amount. Your spouse, a close friend or relative would not own any part of your home.

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