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How much of your salary should you spend on a bond?

We help you determine your bond affordability with our analysis of how much of your salary you can afford to set aside for monthly repayments.

Article summary

  • As a rule of thumb, you should be setting aside 30% of your salary for the home loan repayments.
  • This could change depending on interest rates, and whether you are applying for joint bond ownership with a spouse.
  • There are a range of tools that can help you determine your bond affordability.

Research from Lightstone property showed the minimum salary for buying a home to be around R20 000 (assuming a 20 year repayment term). But another critical question would be: What proportion of your salary should you be spending on the monthly repayments for that home loan?

Of course, this number must take into account monthly living expenses, income, and the current interest rates. Performing this calculation will give you an idea of how close you are to making the dream of home ownership a reality.

As a rule of thumb, you should expect about 30% of your monthly income to be used for bond repayments. Anything above that, and you are entering risky territory.

30% has been settled upon as the safe number because it leaves lots of room for living expenses, and it is a realistic amount to set aside for a home loan.

Of course, other factors will come into play, such as:

Interest rates

A lower interest rate means you’ll be able to spend a slightly lower percentage of your salary. You should still keep the 30% rate in your mind when searching for a property you can afford, but the interest rate obviously will play a role in your decision making.

Thankfully, South Africa’s interest rates are currently at record lows, due to a succession of interest rate cuts in 2020. This makes it a good time to buy property.

Joint bond application

If you’re applying for a joint bond with a spouse, the percentage of your salary devoted to the home loan repayments can be a little higher, as you’ll both presumably be pooling your resources to cover living expenses.

The location of the property

Lightstone’s estimated minimum salary of R20 000 doesn’t take into account the location of the property. In truth, your required monthly income for safely paying off a loan will depend on average house prices in that region.

However, they do provide estimated minimum salaries for properties in certain locations. The 30% rule of thumb rate is helpful in this regard, as you can look at the estimated minimum income for a property in a certain area, and calculate what 30% of that would be.

For example:

  • Fresnaye, Cape Town: Average property price is R6 400 000, requiring a monthly income of R213 000, 30% of which is R63 900.
  • Parkhurst, Johannesburg: Average property price is R3 200 000, requiring a monthly income of R106 500, 30% of which is R31 950.
  • Umhlanga Rocks, Durban: Average property price is R3 200 000, requiring a monthly income of R106 500, 30% of which is R31 950.

Meanwhile, our Bond Calculator helps determine what you can afford, and also provides an estimation of your monthly bond repayments, so you can ascertain what proportion of your salary this will amount to.

Note: The bank only looks at your fixed monthly income when determining whether to approve your home loan

They won’t take into account any bonuses you may receive at the end of the year; and if you earn a commission, they generally use a three-month average income from your commissions when analyzing your financial situation.

Using a home loan comparison service such as evo Home Loans will put you in a stronger position to negotiate with banks, as we submit your home loan application to multiple banks and allow you to compare the deals they offer in exchange.

As mentioned, we can prequalify you for a home loan, giving you an idea what you can afford. We can advise you on how your financial situation impacts your chances of home loan approval.

To make the home-buying process that much easier, evo also offers a range of home loan calculators to help make the home-buying process easier. Get prequalified for a home loan with evo, then, when you’re ready, you can apply for a home loan with evo.