With the exception of those who acquired an early inheritance or who have saved diligently for years, applying for a home loan is something most South Africans will need to do to pay the purchase price of a home. Before you begin the home hunting process, it is important to know the minimum monthly income required to qualify for the required home loan.
It is always advisable to go through a series of checks to assess whether that dream home is actually affordable. How much security future owners can afford will depend on several factors, including the buyer’s take-home pay and credit rating. Getting pre-approved by a bond originator such as BetterBond is a crucial step in determining your affordability and the price range of properties you can expect to consider. Once you’ve determined the right price range, you won’t have to waste time looking for properties that don’t fit your budget.
There are a number of options available to make qualifying for a home loan in South Africa a reality, rather than a distant dream. Providing a minimum wage requirement for a home loan in South Africa is tricky as financial institutions are willing to offer a loan amount commensurate with your income. The lower your income, the lower the loan amount you can qualify for. Your credit score will also play an important role in determining how much a bank is willing to lend you. However, as a general rule, you shouldn’t spend more than a third of your net monthly income on your monthly bond payments.
To give potential buyers a very rough idea of the minimum incomes for a home loan, it may be helpful to consider the cost of homes in each province and the salary you would need to qualify for a home loan of the same value. According to BetterBond data from July 2022, to qualify for a home loan of equivalent value to the current prime rate of 9%, you will need to earn a gross family income of the following in each province:
- In the Eastern Cape, the average purchase price is R1,048,847 (the most affordable of all South African provinces), so you will need to earn at least R32,000 per month to afford a home loan of this value .
- In the Western Cape, the average purchase price is R1,778,806 (the most expensive of the provinces), so you will need to earn at least R54,000 per month to afford a home loan of this value.
- In KwaZulu-Natal the average purchase price is R1,482,625, so you will need to earn at least R45,000 per month to afford a home loan of this value.
*Calculations are based on a 20-year mortgage at the current prime rate of 9%.
Beyond what a buyer might claim, remember to remember that the purchase price of the home isn’t the only cost you need to consider. Not only do you need to ensure that there is enough room in your monthly budget after living expenses to cover monthly bond repayments, but it is also important that you have enough saved up to pay for other upfront living costs. purchase of a home, such as bond fees, transfer taxes and associated fees.
“Buying a home is a smart investment for your future financial situation. It can also be helpful to speak to your local RE/MAX office about the state of the local market so you know what to expect before you begin your house hunting journey,” he concludes.
Adrian Goslett is Regional Director and CEO of RE/MAX Southern Africa.