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The bond finance options for buying a home in South Africa

Buying your first home and worried about funds? Don’t worry. You have a number of options available to you for obtaining bond finance.

Bond Finance

Article summary

  • The first thing you need to think about is saving up for a deposit, as this will affect your chances of home loan approval and your interest rates. You will also need funds for legal costs such as bond registration.
  • If you’re unable to secure the home based on your own income, you can approach a family member to act as a guarantor, assuring the bank that they will cover outstanding costs.
  • You can also purchase a property together with a partner or group, so that each individual contributes to the required funds.

Buying a home is the biggest financial commitment that most people will make in their lifetime. You may need to line up a deposit, and you’ll need to calculate what monthly bond repayment you can afford. For those who are struggling to afford it all, ooba Home Loans, South Africa’s leading home loan comparison service, says there are options.

Preparing for a home purchase

When you start thinking about buying a home, the first thing that you need to do is get prequalified. It is also advisable to try and save up for a deposit to decrease the size of the home loan you require. “This is a good way to increase your ability to afford your monthly bond instalments, and it will positively impact on the interest rate that banks are willing to offer you,” says Linda Rall, ooba Home Loans’ KwaZulu-Natal and Eastern Cape Provincial Sales Manager.

Then remember that, aside from your deposit and your monthly repayments, you will also have to come up with the cash for the legal costs, transfer duty, bond registration and bank fees. ooba Home Loans has several online tools available on our website or on the ooba App, that will help you calculate the costs involved in your planned property purchase:

She says that it is best to have your affordability assessed upfront. “ooba Home Loans can provide you with a prequalification that will give you an accurate idea of what you may qualify to buy for, and what amount you will need to save up, in order to provide the required deposit.”

Choose from one of many bond finance options

“Don’t despair if you’ve found your dream home but you find you are short on funds for the deposit or to cover the transfer and registration costs”, says Rall. “At this point, you still have options.”

100% home loan and cost inclusive options

If you don’t have access to funds for a deposit, you can apply for a zero deposit, or 100%, home loan. With banks’ ongoing appetite to lend, particularly to first time home buyers, there is a good chance your application for a 100% home loan will be approved, provided you meet the bank’s credit score and affordability criteria. Some banks will also consider approving up to 105% loan to the value of the purchase in order to assist you with paying the costs. This is based on the buyer having a good credit score and is able to afford the repayment monthly in terms of the National Credit Act requirements.

Buying with a partner

Another alternative is finding a partner to share the purchase of your new home with. “This becomes a massive personal commitment as well as a financial one,” says Rall. “So you need to be sure that you have worked out all the ins and outs of the process before you sign the offer.”

She says that property-buying partners should commit certain things to writing: What will happen if one partner wants to leave or in the unfortunate event of the death of one of the partners? These outcomes should be committed to a contract and be drawn up by a lawyer.

“Both parties should also be willing to disclose any financial issues that might affect the partnership, as they will both be independently assessed by the bank as individual buyers,” says Rall.

Once the property has been purchased, she advises that the partners ensure that the costs of maintaining the property are equally shared, or at least that they are carefully recorded, so that the proceeds can be split fairly when the property is sold.

Finding the money elsewhere

If none of these options are available to you, it is possible to obtain a short-term loan of up to R150 000 to bulk up your deposit, but be aware that you will have to show affordability to cater for the short-term loan repayment and such loans are generally at a high interest rate.

Or if you belong to a pension or provident fund, it can be possible to use that as security to borrow the deposit for your home loan if your fund administrator allows for pension-backed lending possibilities.

Buying your first property can be a confusing and daunting exercise, so it’s very useful to have the insight of an expert to guide you while making these tough decisions and commitments.

“If you use an expert home loan comparison service like ooba Home Loans, their qualified consultants will assist you with the home loan application process, walking you through every step of the way. They will submit your online or electronic PDF home loan application to multiple lenders, including your own bank, in order to negotiate the very best terms and interest rate available to you, whilst significantly improving your chances of approval. All at no cost to you,” says Rall.

“ooba Home Loans currently gets approval for more than eight out of every ten home loan applications that they submit to the banks. This means that you are far more likely to achieve a successful home loan result by using ooba Home Loans, than if you were to go directly to your bank only.”

ooba Home Loans offers a range of tools to make the home buying process easier. Start with their Bond Calculator, then get prequalified with the ooba Home Loans Bond Indicator, a self-service online tool, to determine your credit score and affordability. Finally, when you are ready and have made an offer on your dream home, you can apply for a home loan with ooba home loans.

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Ooba home loans services are simply the best. My Consultant Bianca Dancer was so hands on and helpful from the get go. She guided me through the entire process and put me at ease being a first time buyer. I highly recommend their services.

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Jay Govender and Maleshini Reddy from OOBA provided outstanding assistance and guidance in securing our home loan. Response times were excellent and they were professional and friendly.

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Estelle Vorster was really helpful in securing the best deal for my home loan, she not only negotiated a lower interest rate she went as far as securing 50% discount on the transfer costs.

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