Sharp Increase in Self-Employed Bond Applicants a Sign of the Times

High unemployment rates, the impact of the recent pandemic on small and medium businesses, a growing gig economy, BEE regulations and a flagging economy have precipitated a notable increase in the number of resourceful South Africans striking out on their own and this is clearly evidenced by a corresponding jump in the number of self-employed bond applicants.

“It’s definitely an emergent trend that’s becoming increasingly noticeable,” says Cobus Odendaal, CEO of Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg.

 “Where traditional salaried buyers once dominated bond applications and self-employed buyers were few and far between, we’re now seeing a notable rise in entrepreneurs, freelancers and independent contractors stepping into the market.

“This shift reflects broader economic realities including rising corporate job insecurity, the gig economy’s growth and a growing desire for financial independence and it’s more than just a fleeting change; it’s a sign of the times.”

According to Kay Geldenhuys, Head of Sales Fulfilment at ooba, self-employed home buyers now account for 14% of ooba’s home loan applications processed, representing around 20% of the value of applications. 

“This is up from 9% of our applications during the pandemic period and is indicative of the more positive sentiment amongst business owners in South Africa. 

“And, although banks have traditionally been more cautious about granting loans to self-employed home buyers, they are currently responding positively to the rising trend of increased home buying activity by self-employed applicants by easing the terms and conditions of lending to this market.

“Whilst self-employed applicants are still required to provide banks with much more paperwork to validate their affordability for a home loan, some of our banks have relaxed their paper-work requirements for professional self-employed applicants who regularly draw the same level of income monthly.”

However, banks still favour predictable PAYE income, leaving many business owners frustrated despite strong earnings and Odendaal says that for these lenders, preparation is key.

“Self-employed buyers must ensure their financial documentation—tax returns, bank statements and audited accounts—is impeccable and a larger deposit also significantly boosts approval chances.

“It’s not uncommon to see applications turned down because self-employed applicants who do not regularly draw the same income monthly have asked their bookkeepers, who may not be experienced in home loan applications, to compile their information for them.”

He advises that the best way for these buyers to avoid delays and disappointment is to seek expert advice from a bond originator before they even begin searching for a property.

“This way, all their documentation will be in place when they do apply for a bond, and they will also have an idea of how much they can afford to spend.

“Bond originators also have the ability and skill to obtain the most favourable rate for the buyer by shopping around on their behalf and that it is at no cost to them.”

Geldenhuys says that requirements can vary according to the application and the loan amount requested, but self-employed buyers will generally need to provide the following:

• Comparative financials covering a trading or working period of the latest two years
• A letter from their auditor confirming personal income
• If their financials are more than six months old, the bank will need up-to-date signed management accounts
• A cash-flow forecast for the ensuing 12 months
• A personal statement of assets and liabilities
• Personal and business bank statements
• Their latest IT34, which is confirmation from SARS that their tax affairs are in order
• Their company, closed corporation (CC) or Trust statutory documents
• The ID documents of all their business’s directors, members or trustees
• Depending on the complexity of their application, it may also be useful to provide a short CV

“Once an offer to purchase has been made, time really becomes of the essence and mistakes are easily made in haste. Some errors are quickly remedied but others can’t be fixed overnight, and this is when costly delays can occur.”

She adds that potential pit falls for self-employed applicants are where their financial statements are outdated, and they do not have up-to-date management accounts, where they have not kept their personal expenses separate from their business expenses and where their financial and tax affairs are not in order.

Odendaal concludes: “The additional criterion for self-employed buyers is understandably daunting, however, with the guidance of knowledgeable and experienced property finance specialists and estate agents it’s possible to seamlessly navigate the potential administrative minefield. that acquiring your dream home entails

“And, as more South Africans embrace entrepreneurship, the property market must adapt. For agents, understanding this shift means better guiding clients—and for self-employed buyers, it’s a reminder that homeownership is still within reach, with the right strategy.”