Buying a house while under debt review

The short answer

While you're under debt review, you can't take on new credit, and a home loan is credit. That includes a bond from a bank and a home loan from a private seller. The block lifts once you receive your clearance certificate and the debt review flag comes off your credit record.

What you can do is lease. A lease isn't a credit agreement. So you can live in the home you want to buy, lock in its price, and buy it once you're cleared.

Why the law blocks new credit

Debt review is a process under the National Credit Act. A registered debt counsellor restructures what you owe into one affordable monthly payment, and your creditors are held back from legal action while you pay.

The trade-off is in section 88 of the Act: once you've applied for debt review, you may not take on further credit until it ends. Lenders know this. The credit bureaus flag your record, and a bank that lent to you anyway could be accused of reckless lending. It's a protection, not a punishment, even if it doesn't feel that way.

How you get out: the clearance certificate

When you've paid off the debts in your plan, your debt counsellor issues a clearance certificate (often called a Form 19). A long-term home loan you already have doesn't have to be paid off first; it can keep running at its normal terms.

The certificate is sent to the credit bureaus, which remove the debt review flag, usually within a few weeks. Keep a copy, and check your credit report afterwards to make sure the flag is gone. Every South African can get a free credit report once a year from each bureau.

After clearance, banks look at your history

Being cleared opens the door, but the bank still decides whether to walk you through it. It will look at your income, your expenses, your deposit and how you've handled payments since.

Some lenders want to see a stretch of clean, on-time payments after clearance before they'll approve a bond. A bond originator can tell you which banks are more flexible, and they don't charge you for applying to several banks at once. The stronger your record during and after debt review, the easier this part becomes.

Use the waiting time: lease the home now

Here's where rent-to-own earns its place. You don't have to keep renting a home you'll never own while you finish your plan. With Lease to Buy SA you can lease the home you want, with the sole right to buy it at a price fixed on day one.

Choose a lease that outlasts your debt review: if you have two years left on your plan, a three-year lease gives you breathing room. Pay your rent on time, finish your plan, get your clearance, and then buy with a bank, or with us. Seller finance from Nine Stones Capital is credit too, so you'll need your clearance certificate for that step as well.

What we look at instead of your credit score

A credit score is a summary of the past. We care more about the present: what you earn, what's left over at the end of each month, what you've saved, and how you've paid your rent.

Someone with R20 000 left over every month and a clean rental record is often a better fit than someone with a perfect score and nothing left over. That's why our form asks about money left over, not just income.

A realistic timeline

Here's how it could look for someone with 18 months left on their debt review plan:

• Month 1: apply, choose a home, sign a three-year lease and option at the attorney, move in.
• Months 1 to 18: pay rent and debt review instalments on time.
• Month 18: final debt review payment, clearance certificate issued, flag removed.
• Months 19 to 30: build a clean record, save towards a bigger deposit.
• Month 30 or so: buy, with your option fee coming off the price.

Your own timeline will differ, and we'll work it out with you.