How much a deposit will save you on your bond repayments

Article summary

• A deposit lowers your monthly repayments and gains you more favourable interest rates, saving you money in the long-term.
• A deposit shows the seller and lender you’re committed, and makes you less of a risk to the lender.
• It is possible to get a 100% home loan, removing the need for a deposit, but doing so will lead to higher interest rates and higher monthly repayments.

Buying a home usually requires you to pay 10% to 20% of the purchase price up front. This lump sum is referred to as the deposit; and while saving up for the deposit may be a challenge, it can benefit you for a number of reasons, and save you money in the long-term.

How much can a deposit save you?

While it is possible to get a 100% home loan, this option (mainly aimed at first-time homebuyers who may lack the funds for a deposit) will lead to higher interest rates and higher monthly repayments.

You can use the ooba Home Loans’ free, online tool; the Bond Repayment Calculator, to see how much your deposit will save you in the long-term. For example, if the price of the house is R1 000 000 and you don’t put down a deposit, your monthly repayment will be R7 753 and your total amount repayable will be R1 860 717, over a period of 20 years at an interest rate of 7%. If you put down a 10% deposit of R100 000, your monthly repayment goes down to R6 978 and the total amount payable becomes R1 674 646; saving you R186 071 in the process.

If you have the resources to commit to a higher deposit, it’s recommended you do so. The higher your deposit, the more you save in the long-term.

How else can a deposit benefit you?

• It shows the seller and the lender that you’re committed, improving your chances of securing the deal before someone else does.
• It improves your chances of securing a home loan, as the lender will consider you less of a risk.
• It will gain you more favourable interest rates, saving you money in the long-term.

Who do you pay the deposit to?

Normally the deposit is paid to the estate agent or transferring attorney, but ooba Home Loans offers a strong alternative with Buyers Trust. This safe and secure service protects you from the risks of having your deposit phished. Buyer Trust creates a bank account with one of the major banks in your name, you transfer your deposit directly into that account, and Buyers Trust administers the account under a specific investment mandate provided by you. You can view the account at any time and receive statements, providing 100% transparency on your investment.

When signing the Offer to Purchase, select Buyer’s Trust as the financial service provider with whom you wish to invest your deposit. You’ll gain the advantage of an account in your own name with one of the major banks, a great rate of return on interest, transparency and high-level security.

Securing a home loan

Once you’ve gathered the resources you need to make the deposit, time to take the next step and apply for a home loan. ooba Home Loans can help with this process by applying to multiple banks on your behalf, allowing you to compare deals and choose the best one.

They also offer a range of tools that can make the home buying process easier. Start with their Bond Calculator, then use the ooba Home Loans Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.