When speaking to buyers, one of the most common misconceptions we hear at Phoenix Bonds is:

“I don’t have enough income right now, but I have a property I can put up as collateral for the bank.”

In the past, this may have carried weight. But in today’s South African lending environment, collateral alone is not enough. The primary factor banks look at when granting a home loan is serviceability – your ability to prove that you can repay the loan from your regular income.

What Is Serviceability?

Serviceability is a measure of how easily you can afford the monthly repayments on a bond. Banks calculate it by assessing:

• Gross and net income (salary, rental income, business profits, etc.);
• Existing debt commitments (credit cards, car finance, personal loans);
• Living expenses and dependants; and
• Debt-to-Income (DTI) ratio – how much of your income is already going to debt.

If the bank cannot see a clear and consistent cash flow to cover the new bond instalment (plus a buffer for interest rate increases), the application will be declined – even if you offer another property as security.

Why Collateral Alone Doesn’t Work Anymore

Historically, banks placed more emphasis on collateral because it gave them an asset to fall back on if the loan defaulted. However, in South Africa today:

1. The National Credit Act (NCA) requires lenders to prove affordability before granting credit. This means banks can’t simply rely on assets – they must ensure borrowers can repay.
2. Collateral is a last resort. Repossessing and selling a property is costly, time-consuming, and often results in losses for the bank. It is not their preferred method of recovery.
3. Cash flow = sustainability. A client who cannot meet monthly obligations will likely default, regardless of the value of the collateral.
4. Basel III banking regulations require South African banks to hold capital against loans. These risk-weighted asset rules force banks to prioritise repayment ability, not just security.

The Bottom Line

Even if you own other property outright, or are willing to put it up as security, a home loan cannot be granted without proven income to service the debt. Collateral may strengthen your application, but serviceability is the foundation.

At Phoenix Bonds, we help buyers understand what the banks are really looking for, and we guide you through the prequalification process so that you know upfront what you can afford. This prevents wasted time, frustration, and disappointment later.

✅ How Phoenix Bonds Can Help

• Prequalification: Get a clear picture of your affordability before you start house-hunting.
• Multiple bank applications: We compare offers across banks to maximise approval chances.
• Expert guidance: We’ll explain why certain applications succeed (or don’t), and how to strengthen your profile for approval.

📞 Thinking about applying for a home loan? Let Phoenix Bonds help you find out what you really qualify for. Contact us today for a free prequalification.