The banks have received much favourable publicity on account of their willingness once again to give 100 percent bonds – to select clients, says Rob Lawrence, national manager for Rawson Finance.
Just how “select” they have to be, became clear recently when Lawrence revealed his company’s hit rate in this category: on average only 3 to 5 percent of applications for 100 percent bonds have proved successful.

In the past, he says, more than 40 percent of applications for 100 percent bonds were successful.
“The public have to understand that a 100 percent bond involves a very high risk for the bank. With absolutely no deposit at stake, it is possible to see the monthly repayments as “rent” and bondholders can walk away from their commitments all too easily – and there have been many cases where this happened.
“With property no longer growing in value at 20 to 30 percent a year as in 2004 to 2007, the chances of the banks recovering a reasonable sum when bondholders default are greatly reduced – especially as the whole repossession process is costly and time consuming.”
If at all possible, says Lawrence, bond applicants should tailor their finances to be able to apply for a maximum 90 percent of smaller bond.
In the 90 percent category, where clients can prove income and have clear credit records, Rawson Finance’s recent hit rate has been as high as 80 percent. But, he says, it is very important that clients disclose their full financial position to their bond originators as this will ensure their applications stand a good chance of succeeding.
“Unfortunately, the banks have been promoting 100 percent bonds, which has now created an expectation that every buyer who applies for a 100 percent bond will get one, whereas 95 percent will not.
“This has led to a lot of very disappointed prospective property owners, angry sellers and frustrated estate agents. Because of this, we carefully examine every buyer’s financial position and if we believe they might not qualify for 100 percent bonds, we try to see whether a deposit can be raised,” says Lawrence.

SOURCE: Sunday Weekend Argus, Property. Sunday 14 March 2010, p. 5