How much deposit is needed to buy a house in South Africa?

Article summary

• A deposit usually requires 10% to 20% of the home purchase price.
• You can use ooba Home Loans’ Deposit Savings Calculator to work out how much you need to save for a deposit.
• A deposit will show the seller and lender that you are committed; and if you put in more than the required 10%, you’ll reduce your monthly repayments and gain more favourable interest rates.

In most cases, buying a home will require you to put down a deposit that amounts to between 10% and 20% of the home price. The remainder will then be covered by the lender once you’ve successfully applied for a home loan.

There are exceptions, such as the 100% home loan, aimed at first-time home buyers who may lack the savings for a deposit; but generally you should expect to have to put down a lump sum up front.

So how much can you expect to pay for the deposit? Knowing the answer to that will give you an idea of how much you need to save.

How can I work out how much deposit is needed to buy a house in South Africa?

The standard home loan term is 20 years, and the standard deposit amount is 10% of the purchase price. You can use ooba Home Loans’ free, online calculator, the Deposit Savings Calculator, to work out how much deposit you will owe on the property.

For example, if the purchase price of the home is R2 000 000, requiring a 10% deposit, the deposit will be R200 000. If you already have R100 000 saved up (although ideally it would be more than that), the calculator will work out how much more you need to save per month, depending on when you would need the deposit.

Knowing how much you require means you can begin the process of saving for a deposit with an end goal in mind. Obviously you will need to draw up a monthly budget, and there are a number of measures you can take, such as getting rid of credit card debt.

The advantages of a deposit

The deposit shows the seller and lender that you are committed to the deal. If you have the opportunity to deposit more than the required 10%, you should take it, as doing so will reduce the term of the loan, the required monthly repayments, and earn you a more favourable interest rate.

Who do I 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.

The next step: The home loan

Once you have your deposit ready, it’s time to 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.