Are NCA - National Credit Act Laws Preventing You From Purchasing a Home in the Area You Thought You Could Afford?
In the past, you could get away with reckless spending and financial companies could get away with providing you with too much credit that was beyond your ability to repay.
Due to this the NCR - The National Credit Regulator was established in order to regulate the credit industry to curb irresponsible spending and lending.
The NCR tasked by government under the "NCA Act" - National Credit Act 34 of 2005 to monitor lending, credit provision, credit bureaus and debt counsellors. This is to ensure that the process of giving out credit is done in a more controlled manner.
Read more about the New Credit Act here
Due to this the NCR - The National Credit Regulator was established in order to regulate the credit industry to curb irresponsible spending and lending.
The NCR tasked by government under the "NCA Act" - National Credit Act 34 of 2005 to monitor lending, credit provision, credit bureaus and debt counsellors. This is to ensure that the process of giving out credit is done in a more controlled manner.
Read more about the New Credit Act here
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Did Your Home Loan Get Declined? It could be that your DTI and LTV ratio is too high!
The rules of the NCA (National Credit Act) are forcing many would be home buyers out of the house hunting market and into the rental market because of the fact that their debt to income ratio is too high! Some say the DTI - Debt To Income ratio and LTV - Loan To Value ratio is as important as your credit score as they all work hand in hand.
What exactly is your Debt to Income Ratio?
Simply put your DTI (debt to income) ratio is the amount of debt you have compared to your overall income. Home loan lenders look at your DTI ratio when they are trying to decide whether to lend you money or not. The interesting thing about the new credit act is that a person earning substantially more than you may be declined by the bank because her debt to income ratio is higher than yours!
What exactly is your Loan to Value Ratio?
Your LTV (loan to value) ratio is calculated by comparing the value of the property you want to buy against the value of the home loan you are applying for.
A high LTV ratio means that your homeloan provider is at greater risk and has more to lose should you the buyer find yourself unable to service your monthly repayments.
This is why you are encouraged by lenders to put down a large deposit as reduces their risk and gives you a higher chance of having your homeloan approved.
What exactly is your Debt to Income Ratio?
Simply put your DTI (debt to income) ratio is the amount of debt you have compared to your overall income. Home loan lenders look at your DTI ratio when they are trying to decide whether to lend you money or not. The interesting thing about the new credit act is that a person earning substantially more than you may be declined by the bank because her debt to income ratio is higher than yours!
What exactly is your Loan to Value Ratio?
Your LTV (loan to value) ratio is calculated by comparing the value of the property you want to buy against the value of the home loan you are applying for.
A high LTV ratio means that your homeloan provider is at greater risk and has more to lose should you the buyer find yourself unable to service your monthly repayments.
This is why you are encouraged by lenders to put down a large deposit as reduces their risk and gives you a higher chance of having your homeloan approved.
But what about those who have solid, consistent and well managed finances but are still negatively affected by the NCA?
Some will immediately say NO, that's impossible because if you have well managed finances you should not have a high scoring. But it could be that you have a large home loan and that this home is being rented out. Despite you knowing what you are doing and having correctly geared this rental property against potential pitfalls your debt still reflects as relatively high. There may be several circumstances that lead to a NCA based disqualification for your home loan.
What if your personal strategy is to rather avoid putting down large deposits altogether despite you having the money available?
Despite you proving that your your income and finances are consistent and well managed the NCA - National Credit Act rules may dictate that the lender must decline you on the home that you know you can afford and you may have to settle for a lower value home, area and so forth.
What if your personal strategy is to rather avoid putting down large deposits altogether despite you having the money available?
Despite you proving that your your income and finances are consistent and well managed the NCA - National Credit Act rules may dictate that the lender must decline you on the home that you know you can afford and you may have to settle for a lower value home, area and so forth.
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