Before the National Credit Act was in effect, a financier assessed your ability to pay for you
home loan based on your gross household income. This income is before expenses and tax. The rule of thumb was that 30 percent of your gross income should be your
bond repayment. The new act, however, has changed this assessment.
Lenders are now forced to look at disposable income. This is the amount of income you have left after your other expenses have been paid. If your
mortgage or the home loan you are looking to secure is greater than the amount of disposable income you have, you will be denied. The Act though, serves to protect consumers from becoming over-indebted.
The key then, is to increase your disposable income. The quickest way to do this is to pay off other financial obligations quicker. Personal loans, credit accounts and credit cards can be paid off quicker by increasing the repayment amount. Shop around for a cheaper
insurance policy and perhaps down-scale the car you’re driving.
Saving on expenses is easier than generating a second stream of income, but if you have the opportunity to earn a passive second salary, then this increases your disposable income too. For every R1,300 you increase your disposable income by, the sum of your home loan increases by a full R100,000.