Assessing Your Current Debt Load

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🧭 Step 1: Assessing Your Current Debt Load

Before you even look at property prices or bond calculators, you need to know exactly how much debt you’re currently carrying. This includes:

• Credit cards and store accounts
• Personal loans
• Car finance
• Student loans
• Any “buy now, pay later” or overdraft facilities

Banks evaluate not just how much you owe, but how well you manage it. If your repayments are always on time, that boosts your credit score. But if you’re constantly maxed out or missing payments, the bank sees higher risk — which can reduce how much they’ll lend you.

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💰 Step 2: Understanding the Debt-to-Income Ratio (DTI)

South African lenders use your Debt-to-Income Ratio (DTI) to measure how much of your income already goes toward paying debt.

Formula:

(Total Monthly Debt Repayments ÷ Gross Monthly Income) × 100 = DTI%

Banks generally want this ratio to be below 40%, though ideally closer to 30%.

Example:

• Monthly income: R35,000
• Debt repayments: R10,000 (car loan, credit cards, etc.)
• DTI = (10,000 ÷ 35,000) × 100 = 28.5%

This means you’re likely still within a safe range to qualify for a bond — depending on your credit score and expenses.

If, however, your DTI is above 45%, you’ll struggle to qualify. The bank will assume you don’t have enough free cash flow to handle additional debt like a mortgage.

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🏠 Step 3: What Banks Actually Look At

Beyond the numbers, banks in South Africa (like Standard Bank, FNB, Absa, Nedbank, and Capitec Home Loans) also assess:

1. Credit Score — Generally, a score above 650 is considered good.
2. Employment Stability — Being permanently employed or self-employed with consistent income for 2+ years improves approval chances.
3. Deposit — A 10–20% deposit signals financial discipline and can significantly improve affordability.
4. Monthly Expenses — Banks include groceries, insurance, school fees, fuel, and levies to ensure you can genuinely afford the repayment.

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📉 Step 4: How Your Debts Affect Your Bond Amount

Here’s a simple estimate using South African averages:

Monthly Gross Income	Ideal Max Monthly Debt (40%)	Likely Bond Approval Range
R25,000	R10,000	R600,000 – R800,000
R35,000	R14,000	R900,000 – R1.2 million
R45,000	R18,000	R1.2 million – R1.5 million

If your current debts already use up most of that 40%, your bond amount will shrink dramatically — sometimes by half.

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🧭 Step 5: Smart Steps to Prepare

1. Pay off small debts first. Closing a few small accounts can improve your credit score quickly.
2. Don’t open new credit lines. Avoid financing furniture, electronics, or taking out short-term loans before applying.
3. Save consistently. Even R1,000–R2,000 per month builds a solid deposit or emergency buffer.
4. Get prequalified. Tools like ooba, BetterBond, or your bank’s prequalification calculator will give you a realistic idea of your bond eligibility.

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📊 Step 6: Check Your True Financial Readiness

Ask yourself:

• After paying all current debts, would you still have at least 30% of your income left each month?
• Could you comfortably handle an unexpected R2,000–R3,000 expense without missing payments?
• Have you factored in homeownership costs (rates, insurance, maintenance)?

If you answered “yes” to all three, you’re likely ready to manage both your debts and a mortgage.

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🏡 Lake Properties Pro-Tip:

Before you submit a bond application, get a free copy of your credit report from TransUnion, Experian, or Compuscan. Review it carefully for any outdated or incorrect entries — even a small mistake (like an old store account still listed as “open”) can reduce your creditworthiness and affect your bond interest rate. Correcting these errors can save you thousands of rands over the life of your mortgage.

Call to Action

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Contact Lake Properties today and let our experts guide you to your ideal property.

If you know of anyone who is thinking of selling or buying property,please call me 

Russell 

Lake Properties 

Www.lakeproperties.co.za 

Www.lakeproperties.co.za 

083 624 7129 

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