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How to secure a home loan as an entrepreneur

The one challenge faced by entrepreneurs when trying to purchase a home is acquiring the necessary bond approval needed to make the dream to own their own home a reality.

The one challenge faced by entrepreneurs when trying to purchase a home is acquiring the necessary bond approval needed to make the dream to own their own home a reality.

Published Jun 29, 2022

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Johannesburg - The jobs crisis in South Africa has reached levels that have never been seen before.

Citizens have to adapt, and the professional climate in the country calls for innovation and entrepreneurship.

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The millennial generation, aged 26 to 41, in particular, finds itself at the forefront of the entrepreneurial revolution that needs to take place in order to overturn a situation that seems to be growing increasingly out of control.

According to Deloitte’s 2019 Global Millennial Survey, 58% of South African young adults say they want more than to work for someone else’s company.

There seems to be positive growth in this regard. This same entrepreneurial-minded generation has become one of the largest buying segments within the property sector.

Entrepreneurs may be wary of trying to purchase a home as they may feel they do not qualify without the income security of people who are in the employ of big businesses or government.

The one challenge they seem to face is acquiring the necessary bond approval needed to make the dream to own a home a reality.

“The process of a bond application looks different for those who are self-employed,” explains Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa.

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“Before beginning the house-hunting journey, I would encourage self-employed buyers to set up an appointment with a bond originator who can provide you with a pre-approval so that you know what you qualify for before getting your hopes set on a property you cannot actually afford.”

Carl Coetzee, chief executive of BetterBond, explains that each bond application is unique, especially for entrepreneurs, so it's advisable to work with a bond originator who has the expertise to manage the process on the buyer’s behalf.

Bond originators can help guide potential buyers through the process. They have the ability to submit one set of paperwork to multiple banks on your behalf, saving potential buyers time and money.

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Coetzee says the following documents will help streamline an entrepreneur’s bond application process:

  • A completed and signed application form.
  • Your offer to purchase.
  • A copy of your ID. If you are using a smart card, include a copy of the front and back.
  • The three years set of signed financials. If these are older than six months, you'll need up-to-date signed management accounts.
  • An auditor's letter stating your income, and the expenses paid for by the business.
  • A signed and dated personal statement of assets and liabilities, and a signed and dated statement of personal income versus expenses.
  • Personal bank statements for the last three months and your latest six months' business bank statements.
  • Your latest IT34 from Sars. This is not mandatory on submission but may be requested by the bank.

When assessing your application, banks will also need to assess whether there is a risk that you might default on payments owing to cash flow issues in your business.

“If you can prove a history of managing your finances responsibly, banks will consider your application more favourably.”

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They want to see that you have a constant income stream and that you can manage this effectively. This means making sure that your tax and financial statements are up to date, Coetzee explains.

He adds: “If possible, separate your business and personal income and expenses. Banks will look at affordability, so separating your expenses will present a clear financial picture of what you can pay on a bond each month.”

Once the necessary pre-approval is in place, Goslett recommends setting up an appointment with a local real estate professional.

His advice to buyers is to partner with a reputable real estate agent like himself to give you an added advantage as they might know of listings that are available before they are even made available on property portals.

“It is not uncommon to have a property sell before it even reaches the internet.

“Partnering with a real estate agent allows you first pick of any suitable listing as soon as they enter the market, which increases your chances of finding the home of your dreams.”

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