Who Qualifies For A Bond?
When the question comes up, as it will do in most people’s lives, can I afford to buy my own home, the answer will generally be: Yes you can (if you quality for a bond).
A bond, mortgage, or home loan is what you will apply for. The bank will serve as the lender and grant the money upon approval.
Banks like to lend money against properties, and for many years this was the total function of their business. It is only in the last twenty years or so that banks also began to lend money in the form of granting overdrafts, car loans and credit cards.
However lending money against properties, if properly handled, is good business for banks and in normal circumstances they will always be ready to lend money against a property purchase. Of course they do have their lending criteria that they will strictly adhere to. Most people who can meet their criteria will qualify for a bond.
In order to receive a bond, prospective homeowners must meet a list of criteria. First off, the client must put down a direct deposit on the home. Usually this equals at least 30% of the total cost of the property. The general rule is the more the equity the lower the bond required and monthly payments.
Mortgages are usually repaid over periods of twenty years or more. Also make sure you take into account all the interest your loan will accumulate. Keep in mind that at the beginning of your loan you pay a ton of the interest and little principal. In fact, not until halfway through the bond do you begin to wipe a considerable amount of principal off.
The bond profits both the homeowner and bank the longer it progresses. The banks continue to receive money from the homeowner, while the borrower slowly wipes away the debt.
For first time buyers, putting down a deposit and meeting the payments is a risky process that steals a lot of your total income each year, especially for the first year. Make sure you can afford it.
It is not unusual for first time buyers to receive help from family to help them achieve their goal of owning their first property and getting out of the seemingly never ending rental loop. Many young couples starting out have lived a few years in inexpensive rental properties or even with their parents, so that they can save enough money for a deposit on their first home.
