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Bond declined: How long you need to wait before reapplying

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Home loan declined! These three words are dream killers for any and every home buyer. They are the words that keep you up at night as you wait for feedback for finance from your bank on the home that has stolen your heart.

The first question you ask if your application has been declined is “why”? There may be a number of reasons for your bond request being denied: A lack of affordability, a lack of “value” in the home to provide security against the loan amount, poor credit repayment behaviour and judgements for a failure to pay existing credit providers.

The psychology behind a bond being declined leaves home loan applicants with feelings of uncertainty in their financial affairs and could cause them to wait months – even years – before reapplying for a new bond.

Banks hold credit declines against you, don’t they?keeping score

It’s not difficult to make the assumption that banks place weight on a previous decline when assessing a new application. Your credit history is, after all, available for them to see.

“No weight whatsoever is placed on the old application when the new one is received,” says Tommy Nel, head of credit at FNB Home Loans. “Each application is assessed independent of previous applications. The NCAA forces mortgage credit providers to renew the credit bureau information they use to assess applicants after 14 days since the initial request for information from the bureau. Within the 14-day period new bureau information may not necessarily be used.”

But surely there is an appropriate amount of time that before reapplying?

Not necessarily, says Leonard Booysen, head of client service at Nedbank Homeloans, noting that the decline reason would determine the time lapse before reapplying. “If the decline relates to a judgement or adverse credit record or conduct, the client would have to rehabilitate and build up a favourable track record before reapplying,” he says. “If the decline is as a result of ‘affordability’ the client could almost apply immediately, if there is a positive change in his or her financial position. If the decline is due to valuation or issues relating to the security (property being purchased), the client could apply immediately if an alternative property is obtained.”


Do you know which bank will give you the best loan-to-value deal?


Absa’s Nondumiso Ncapai, head of business development at Absa Home Loans, adds a caveat that if the applicant was declined due to poor payment history, her suggestion would be to avoid reapplying too soon thereafter.

“After a period of between six and 12 months there should be sufficient evidence that their financial conduct /discipline has improved,” she says, noting that if the client reapplies a month after a decline Absa might consider the merits for the previous denial. “We will most definitely look at the merits of the new application now being assessed. We might consider whether the concerns raised during the assessment of the previous application have been properly addressed and if they are still valid. If an application was declined due to poor conduct and with the new application we notice that the payment profile has not improved, and then we will decline the application again for the same reason.”


Tommy’s top tip

“If your salary comes in on the same date every month, make sure your debit orders are set to deduct on that same day. The National Payment System processes credits coming into accounts before debits going out of accounts scheduled for the same date, especially for commitments that are reported to credit bureaus such as credit agreements at financial institutions. It is critical to pay your commitments on time and without fail to give yourself the best chance of being approved for credit in future.”


Leonard’s top tip

“Applicants can make use of the Instant Bond Indicator on the official Nedbank website to determine what they can afford. For a more detailed view of affordability, clients should check online on TransUnion – they are entitled to one free bureau check per year.”


Nondumiso’s top tip

“Do not miss payments. This has the greatest effect on your score. Do not fall into the trap of not repaying your debt. Should you not be able to, contact your credit provider to arrange a suitable repayment amount. Taking responsibility now to improve your repayment history will help you to improve your credit score. Remember, the impact of your past credit problems disappears with time, so an older poor credit performance won’t haunt you forever, especially if you take the initiative to improve your account management.”


* Standard Bank failed  to comment by time of going to press

david.steynberg@gmail.com

David A Steynberg, managing editor and director of HomeTimes, has more than 10 years of experience as both a journalist and editor, having headed up Business Day’s HomeFront supplement, SAPOA’s range of four printed titles, digimags Asset in Africa and the South African Planning Institute’s official title, Planning Africa, as well as B2B titles, Building Africa and Water, Sewage & Effluent magazines. He began his career at Farmer’s Weekly magazine before moving on to People Magazine where he was awarded two Excellence Awards for Best Real Life feature as well as Writer of the Year runner-up. He is also a past fellow of the International Women’s Media Foundation.

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