Around five million self-employed South Africans face challenges securing home loans due to a lack of payslips and the need for official paperwork, while salary earners have seen their spending power drop by nearly 4% over five years as take-home pay growth lags behind inflation
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Around five million South Africans work for themselves, which makes the process of applying for a bond to buy a home tricky as they don’t have payslips. While it is possible to get a mortgage, there’s still official paperwork required that will generally require employing an accountant or bookkeeper.
DirectAxis’ research has found that, over the past five years, nominal take-home pay rose by 22.8%. Yet, cumulatively, inflation has increased by 26.6%, effectively reducing salary earners’ spending power by nearly 4%.
Loan provider DirectAxis’ Gavyn Letley said that, as a result, between 14% and 16% of middle-income households earn additional income from one or more side hustles.
Michael-Anne Abrahams, bond originator from MyProperty Home Loans, said there is a concept that, when it comes to getting a loan, particularly a bond to buy a property, those who are self-employed individuals often face disadvantages.
“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 Abrahams.
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.
However, there’s still a lot of paperwork, and entrepreneurs will need either a bookkeeper or an accountant.
According to Statistics South Africa, there were 1.9 million non-VAT registered businesses in 2023, up from 1.5 million a decade earlier.
This is out of about three million micro-, small-, and medium-sized enterprises in South Africa, the FinScope MSME South Africa 2024 Survey found.
“Informal sector employment accounted for 19,5% of total employment in the fourth quarter of 2024, cementing its status as the second-largest source of jobs after the formal sector,” Stats SA said.
Abrahams said that self-employed people looking to apply for a bond should approach the process methodically and do the necessary “prep” work in terms of paperwork ahead of time.
This, said Abrahams, needs to be less than three months old and include:
“Depending on the bank or the bond originator you work with, additional information may be needed but starting with this list sets you off on a good path,” said Abrahams.
Abrahams added, “Maintaining open communication with your bond originator ensures you’re always ready to provide additional information when needed”.
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