Home loans in South Africa

Home loans in South Africa
Property finance in SA, Home loans

To be a homeowner is a dream of many South Africans.

Home loans in South Africa

A home loan is a specific loan type designed for purchase of a new property or to improve your existing property. Purchasing a property is a very exciting time in your life and can be a great investment for your future. And choosing the right lender is important to make sure you are making a sound investment. With the many reputable South African lenders, you are able to find home loans at competitive interest rates with value added benefits.

What is a mortgage?

A mortgage is a loan that is secured by immovable property such as your home. The mortgage is lent to you in a large lump sum amount to pay for the property that you would like to purchase. This amount will need to be paid back over the agreed upon loan repayment schedule.

There are two main types of mortgage options

  1. Variable interest rate home loans
  2. Fixed interest rate home loans

Variable interest rate home loans

A variable home loan allows new homeowners to pay an interest rate that is attached to the prime interest rate. That means if the prime rate goes down by 1% so will your interest rate. The only drawback is that if the prime rate goes up then so does the amount of interest that you will pay.

Fixed interest home loan

A fixed interest rate on home loans lets you reap the benefits if interest rates go up, your interest rate will remain fixed, ensuring you always know what your home loan repayment will be. Fixed interest rates are ideal for consumers who are on a stricter budget and cannot afford a fluctuation in repayment amounts as this protects you from the unstable market and potential increases.

This fixed interest rate will make it much easier for you to budget as you know exactly how much you need to pay. If the interest rate drops you will unfortunately not benefit from a lower interest rate and you will be charged the agreed fixed rate as set out by your contract.

Loans for first time home buyers

If you are a first-time home buyer there are a lot of special deals and extra benefits to encourage you to purchase a property. These benefits include 100% loans on the purchase price that often have the registration and transferred costs included.

This type of loan was specifically developed to help new buyers purchase property and is only available to first time buyers.

What is a bond originator?

A bond originator helps you to secure a home loan on your behalf. The lender/ originator will provide a free service that allows you to apply for a bond. They will apply for a loan on your behalf to all the major banks and to any other service provider that may be able to assist you. By using a bond originator you will be offered a lower interest rate and be able to compare different options more easily.

The originator will help guide you through the application process and they will assist you in gathering all the necessary supporting documentation. They will ensure that the process runs smoothly as they know exactly what is needed and often have strong relationships with the lender to ensure that you receive a lower rate on your bond as they are aware that they are fighting for your business loan.

What is pre-approval?

If you have been pre-approved for a home loan you will be given a pre-qualification certificate that is valid for three months. This certificate will let you know how much you will be able to afford so that you can start searching for your dream home. To complete the pre-qualification process you will need to do the following:

You will need to submit your supporting documentation, consent to a credit check and then they will conduct a financial assessment and let you know exactly how much you qualify for. 

Once you have your pre-approval certificate you can happily go house hunting.

Fees and charges explained

Transfer fees – This amount is calculated as a percentage of the purchase price of the home. This fee is paid by the person that purchases the property to transfer and register the property into their own name.   

Bond registration costs – These costs refer to the payments that you will need to make to the attorney that registers your bond, draws up the paperwork and does FICA checks. They will also include the attorney lodging the transfer at the Deeds Office.

Tips to finding a personalised home loan

By using a loan comparison site, you are able to easily view the home loan options and features of each lender, making it easier for you to make an informed decision and a good financial investment.

Buying property is probably the best investment a consumer can make.