There has been much hype about the National Credit Act (NCA), which was put into practice on the 1st June 2007. This act replaces both the Usury and Credit Agreements Acts, and has far- reaching consequences for mortgage lending.

The NCA has changed the process of applying for a Home Loan.

The Good News

The NCA is designed to protect the consumer against reckless lending and over indebtedness – this is all Good News. The bottom line is that your income and expenses will be looked at in more detail than before. If you’re in a sound financial position, you should have no problem getting finance.

How the National Credit Act will impact Self Employed individuals

Prior to the implementation of the NCA, clients would use the formula of taking 30% of the gross income for repayment purposes. It is now not that simple, as the bank need to know other regular expenses the client has over and above any deductions. The bank now looks at the surplus when making a credit decision.

NCA Calculation
(This calculates your spending power)

Gross income – Deductions = NETT Income
NETT Income – Monthly expenditure = NETT Surplus Income

From the 1st of June, in order to apply for a bond, if you’re self employed, you’ll need :

CC’s, PTY or Trusts
Identity documents of all members, directors, trustees
CC doc’s, Company doc’s, Trust Deed
Six month’s bank statements – personal and business
Letter of income from Accountant
Latest Audited Financials
Personal Assets & Liabilities

Sole Proprietor
Identity documents
Six month’s bank statements – personal and business
Letter of income from Accountant
Management Accounts
Personal Assets & Liabilities

Your application will also need a little more information. For instance, you will be required to give details of your car and credit card payments and other major expenses in your monthly budget, ie, rates, water & electricity, taxes, maintenance, education costs, etc. You’ll also need to be honest about the credit cards you own and the amounts you owe, department store accounts and all other hire purchase agreements you’ve entered into, including details of other Home Loans.

It is advisable to apply to the Financial Institution that you bank with as they have your banking history and your application will be more favourable.

If you require any assistance when applying for Home Loan Finance please feel free to contact Carin on 021 702-2302 / 083 397 1999 or email : This e-mail address is being protected from spam bots, you need JavaScript enabled to view it