Deposit Useful When Applying For a Home Loan

Deposit Useful When Applying For a Home Loan

More than a quarter of South Africans polled in a www.PropertyGenie.co.za survey on behalf of ooba - South Africa's leading bond origination company, do not feel that it is reasonable to have to put a deposit down when buying a home.

According to the poll, 27% of respondents believe that a 100% bond is reasonable, while 42% said a deposit of 10% was reasonable. 12% of respondents said they believe a deposit of more than 30% was reasonable.

However, according to Craig Deats at ooba, while all banks have again started offering 100% home loans, being able to put down a deposit does make it more likely that your bond application will be approved.

"In the last few months, we have seen a significant increase in applications with low or no deposit. Although it is possible to have your home loan application approved on this basis, it is less likely as the introduction of the National Credit Act (NCA) has resulted in more stringent lending criteria than was applied in the past."

Deats says that currently, the two major reasons for bond declines are having insufficient net disposable income to afford the bond repayments and a poor credit profile.

He adds that besides improving your chances of getting your home loan approved, a bigger deposit could result in a more favourable bond rate which will save you in interest over the term of the loan. "As a home loan is paid back over a long period, generally between 20 and 25 years, even a small deduction in the interest rate on your bond, can save you thousands in interest payments over time."

Finally, he says that some sellers are also more willing to accept an offer if the buyer has a deposit, as there is a higher likelihood that they will complete on a sale.

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A prequalification certificate will take some of the uncertainty out of the house hunting process.

When applying for a home loan, one of your most important considerations should be securing the lowest interest rate possible. And when the home loan is granted, you should do everything you can to reduce the term and the interest that you pay.

In a recent survey conducted on PropertyGenie.co.za, an overwhelming majority of respondents said that potential partners are more attractive to them if they already own a home.

"According to a recent poll conducted by bond originator ooba, three quarters of South African consumers are unaware of their credit profile.

"Many of South Africa's consumers with bad credit records are unable to secure home loan finance to enable them to buy property, according to ooba.