How Much Investment Property Can I Afford?

A South African lender looks at three things: your gross income, your existing debt obligations, and your conduct on credit. The National Credit Act obliges the bank to check that the loan is not reckless, so affordability is assessed on documented income and disclosed commitments, not on optimism.

• Gross monthly income, supported by payslips or, if self-employed, financial statements and bank statements.
• Total monthly debt repayments, including vehicle finance, credit cards, store accounts and student loans.
• Living expenses, which the bank estimates or verifies from your bank statements.
• Credit record and payment behaviour over the past 24 months.

Most lenders will allow total debt repayments of roughly 30% to 36% of gross income, with the bond itself usually capped near 30%. The exact ratio moves with your credit profile and the loan-to-value you are asking for.

The practical method is to work backwards. Take 30% of gross monthly income, subtract existing debt repayments, and you have the instalment the bank is likely to allow. Convert that instalment into a bond amount at the current rate over your intended term, then add your deposit. That is your indicative purchase price.

Every rand of monthly debt repayment removes roughly the same rand from your available bond instalment, and each rand of instalment supports around R95 to R105 of bond at typical rates over 20 years. A R5 000 vehicle instalment therefore removes close to half a million rand of purchase power.

Settling short-term debt before applying is usually the fastest way to raise the price you qualify for. It also improves the rate you are offered, which compounds across the full term.

On an investment purchase, most lenders will consider a portion of the expected rental income, commonly between 50% and 80%, and usually only where there is a signed lease or a credible market rental assessment. Do not assume the rent will carry the bond in the bank's view, and do not assume it in your own.