- Homebuyers who lack the funds for a deposit have another option available to them: the 100% home loan, in other words, a home loan with no deposit required.
- Banks in South Africa are currently approving more100% home loans, in an attempt to boost the property market.
- Although putting down a deposit has many benefits, the 100% home loan presents first-time home buyers, who may have limited resources, with a viable way into the property market.
While there are many benefits to putting down a deposit on your home, in today’s tough economic climate it may be more realistic to take out a 100% bond, especially if you’re a first-time buyer who does not have easy access to a deposit.
Indeed, if you fall into this category of homebuyer, you’re not alone. According to Kay Geldenhuys, Head of Sales Fulfilment at South Africa’s largest home loan comparison service, ooba home loans: “More than 60% of all the applications received by ooba home loans are from buyers who have no access to a deposit”.
More 100% home loans are being approved
According to Geldenhuys, over 80% of these applicants are being approved for finance, and four out of five are successful in their bid to secure a 100% bond. The rest are required to raise a deposit, usually between five and ten percent of the purchase price.
“Contrary to the widely held belief that the chances of getting 100% financing are slim, these stats prove that, when correctly represented, buyers have a very good chance of obtaining a bond without a deposit,” she says.
How a home loan comparison service can help you get a 100% home loan
However, Geldenhuys emphasises the importance of using a reputable home loan comparison service. “Banks are willing to approve 100% bonds if they can see that you have a clean credit history and can comfortably afford the monthly repayment instalments. A reputable home loan comparison service will ensure you are correctly represented to the financing institutions so that they view your application in a favourable light.
“It’s essential that these candidates evaluate their financial situation before applying for a bond,” she adds, noting that there are, equally, many advantages to putting down a deposit.
100% home loan versus putting down a deposit
“By providing capital upfront in the home-buying process, you will avoid paying interest on that amount of money for the duration of your loan period, which can amount to a significant saving in the long term,” she explains, adding that “It also stands to reason that the smaller the risk for the bank, the more negotiable it will be on your interest rate”.
Why now is a good time to get a 100% home loan
The banks’ confidence in the South African property market has resulted in a greater willingness to lend, with ooba home loans reporting a 4.5% increase in their home loan approval rate since the third quarter of 2018. There has also been a 5.1% increase in the approval rate of 100% home loans, partially as a result of banks catering to the needs of first-time homebuyers, who are less likely to have money for a deposit.
To gauge the affordability of your property price, and the likely chances of obtaining bond approval, it’s advisable to get prequalified with a home loan comparison service such as ooba home loans, who provide prequalification as a free service prior to the start of the home-buying process.
“Once you have an indication of the deposit required, you’ll be better positioned to consider the best approach needed to obtain your financing,” Geldenhuys says.
ooba home loans also offers a range of tools that can make the home-buying process a lot easier. To calculate your monthly bond repayments at different interest rates, use ooba’s bond repayment calculator. Then you can use the ooba Bond Indicator, a free, online prequalification tool, to determine your credit score and what you can realistically afford. Finally, when you’re ready, you can apply for a home loan.