For first time buyers considering property in South Africa, the process is both hugely exciting, and immensely scary. Knowing how to go about securing a home loan, and what steps, documents and procedures you need to follow in order to buy your dream home can be tricky if you have never taken the plunge before, and with friends and family all adding even more confusion by offering conflicting advice, it can make the entire process something of a nightmare. Before you give up and resign yourself to a lifetime of renting, consider these expert tips from property management service experts:
- Know your budget and agree on a price limit
Chances are good that you are purchasing property with a wife, husband or long-term partner. Together, you will need to work out your joint budget, and decide how much you can afford to spend on property in South Africa. Much as you may be dreaming of owning that beautiful four story mansion in Constantia, if your income does not allow you to budget sufficiently, you will not be able to secure a home loan. If you choose to go with a joint loan however, you will be able to apply for a greater loan than you would if applying for a single loan – this often amounts to about 25-30% of your joint income in total.
- Understand the bond process and what it means for you
The minimum amount for a home loan in South Africa is about R100, 000. Another key thing to consider is whether you can afford a deposit towards the loan, as this will affect a number of things, including the interest you may need to pay on your loan. When your loan application is received, the bank will determine the Loan-To-Value ratio (LTV) – this is basically the ratio between the loan you require, and the value of the property in question. The lower the LTV ration, the lower your interest rate will be.
- Get all your documents and information together
Once you are ready to put together your application, you will need to have the following documentation ready to give to the bank. In the case of joint loans, both parties will need to provide these documents:
- Copy of your ID
- If you’re full-time employed, three months bank statements
- Your offer to purchase
- Most recent payslip or in some cases, up to six months payslips.
- Self employed business owners will need the following:
- Six months business accounts statements
- Six months personal bank statements
- Proof of monthly income
To qualify for a home loan to purchase property in South Africa, you need to meet certain requirements. You need to be over the age of 21, be employed for at least two years (or self-employed for at least six months) and be earning a minimum of R10,000 joint or single income and have a clear credit history with no defaults or judgements. If you meet these requirements, then you can begin the first steps to purchase your dream property in South Africa.