Millions of South Africans are classified as self-employed today, with GlobalData suggesting the number to be around five million. Regardless of whether the self-employed identify as contractors, freelancers, sole proprietors, or entrepreneurs, those who create work for themselves—and others—deserve recognition and appreciation.
Yet, there exists an idea that when it comes to getting a loan – particularly a bond to buy a property – those who are self-employed are at a disadvantage.
“There may have been a time when being self-employed was a challenge if you wanted to apply for credit or a bond, but these days the process is far more sophisticated and equitable,” says Michael-Anne Abrahams, bond originator from MyProperty Home Loans.
It is worth noting that the National Credit Act seeks to “promote a fair and non-discriminatory marketplace for access to consumer credit”, which includes access to home loan finance.
Abrahams’ advice to self-employed persons looking to apply for a bond is to approach the process methodically, and by doing the necessary “prep” work in terms of paperwork ahead of time.
She explains that before embarking on your home loan journey, MyProperty Home Loans conducts a prequalification assessment as the first step in every application, whether you are employed or self-employed. This provides a clear understanding of affordability and improves your chances of approval. It also helps identify any potential red flags upfront, making the process smoother and more predictable.
Ensure your admin is in order
Making sure you have all the relevant documents in order is an important first step when applying for a bond. It’s a good idea to separate the personal from the professional, if relevant, and to ensure that no documentation is older than three months.
Key Documentation Required
Share Certificate
o A share certificate is required to verify ownership of the business entity.
Financial Statements
o Two (2) years of consecutive Financial Statements signed by a registered Auditor, Chartered Accountant, or Accounting Officer.
o If draft financial statements are provided, they must be verified against the bank statements to substantiate declared income.
o Financial statements must not be older than six (6) months.
o A signed Trial Balance may be accepted in support of Financial Statements older than six months.
Tax Documentation
o The latest IT34 (Income Tax Assessment) is required, subject to the discretion of the Credit Officer assessing the application.
Bank Statements
o Three (3) months’ latest bank statements for the business account.
o Three (3) months’ latest bank statements for the personal transactional account(s), reflecting the declared income.
Optional: Accountant’s Letter
o Although optional, an accountant’s letter can serve as an effective tool to clarify the financial position. This letter can explain how the declared income (e.g., R50,000) is reflected in both the business’s financial statements and bank statements, whether in personal or business accounts.
Why separate business and personal accounts matter
Maintaining separate bank accounts for business and personal transactions is highly beneficial. It simplifies financial tracking, ensures clarity in income verification, and enhances credibility in the eyes of lenders. This practice also allows for a smoother home loan application process, reducing potential delays caused by mixed transactions.
By preparing these documents in advance and implementing sound financial management practices, self-employed individuals can strengthen their home loan applications and improve their chances of approval.
“Maintaining open communication with your bond originator ensures you’re always ready to provide additional information when needed,” says Abrahams.
Tax matters
It’s well known that we can be certain of two things in life – death and taxes. The latter is especially true when it comes to applying for a home if you’re self-employed.
To this end, make sure all tax returns are filed – whether you are trading as a sole proprietor or business – as outstanding tax matters will hamper the outcome of a bond application.
Most lenders (typically a bank) require submission of an ITA34 document, which is a summary of your assessment of the tax year, and indicates whether you owe the SARS money or not.
It’s a good idea to work with a tax accountant if your affairs are complex or not up to date, as this may be the most efficient way to bring it to order in the right way.
Check your credit record
A credit report is a dynamic, ‘living’ document that reflects your financial behaviour over time. It showcases your ability to manage and repay various credit facilities (loans/credit cards/retail accounts etc). Lenders use this report to assess your creditworthiness, making it a key factor in loan approvals and interest rates, especially home loans.
The moment you start thinking about applying for a bond to purchase a property, is the time to do a credit check. Various credit bureaus, such as TransUnion and MyCreditCheck offer one free credit check per year, and this is a good starting point for assessing your creditworthiness. Each credit bureau has its own scoring system, and based on their specific method, they will indicate on your profile whether your score is considered bad, good, or excellent.
MyProperty Home Loans simplifies the process by retrieving your credit score and profile for you. We then review the findings together, helping you understand your financial position and the best path forward.
Work with a bond originator
Anybody looking to apply for a bond will do well to consider the services of a bond originator.
Bond origination is a service that assists buyers in obtaining a bond at a favourable interest rate, and they typically work with all the major banks in the country. “A bond originator works on the buyer’s half, taking care of all the paperwork, and negotiating the best interest rate. Bond originators earn a fee from the bank for the business they bring in so the service is free to clients,” Abrahams explains.
For example, at MyProperty Home Loans, you only need to complete one home loan application, which the team submits to all the major banks. “The team’s goal is to get you the lowest interest rate on your home loan. Even a 0.5% difference in the interest could save you thousands over a 15- or 20-year loan period so the lowest possible interest rate does matter,” Abrahams adds.
Securing a home loan as a self-employed individual is easier than you think—especially with the right support. MyProperty Home Loans, for example, handles the credit score and profile retrieval for clients, allowing them to focus on organising the paperwork and tax affairs. With expert guidance, you can navigate the process with confidence and ease.