Buying a home is the biggest financial commitment that most people will make in their lifetimes. You’ll need to line up a deposit and calculate what monthly bond repayment you can afford. For those who are struggling to afford it all, ooba, South Africa’s biggest bond originator, says there are options.
"When you start thinking about buying a home, the first thing that you need to do is save up for a deposit. “This is both a good way to assess your ability to afford your repayments, and it makes the bank far more likely to approve your home loan,” says Linda Rall, ooba’s KwaZulu-Natal 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 has several online tools to help you calculate the costs involved in your property purchase, such as your monthly bond repayments, how much you need to save every month for a deposit, and bond and transfer costs, at www.ooba.co.za/calculators.
“Don’t despair if you have found your dream home but you find you are short on funds for the deposit and monthly bond repayments,” says Rall. “At this point, you still have options. You can try to find a cheaper home or cheaper area, you can consider turning to someone close to you for help, or you can try to borrow additional money to make up the shortfall.
She says that it is best to have your affordability assessed upfront. “ooba can provide you with a prequalification that will give you a clear understanding of what you may qualify to buy and what amount you will need to save up in order to provide the required deposit.”
Getting a guarantor
If you find that you are unlikely to secure a home loan based on your own income, you can approach a family member to act as a guarantor. Not all banks accept the offer of surety by another party, but for those who do, the person signing surety must qualify for the home loan in their own right, and should have a direct interest in the property, like a child living on the premises.
“It is very important that both parties are happy with this arrangement,” says Rall. “Remember that should you default on your monthly payment, the guarantor will be liable. So you have to be pretty certain that’s not going to happen, your guarantor has to be confident that they will manage if it does, and you should have a written agreement in place to cover this eventuality.”
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 a will 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 have to be independently assessed by the bank as individual buyers,” says Rall.
Once the property has been purchased, she advises that the partners should then 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 once the property is sold.
Finding the money elsewhere
If none of these options work for 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 rate of interest. 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 homeloan.
Buying your first property can be a confusing and daunting exercise, and it’s very useful to have the insight of an expert to support you while making these tough decisions and commitments.
“If you use an expert bond originator like ooba, your bond will be shopped around to all the banks, improving your chances of approval and of getting a better interest rate, all at no cost to you,” says Rall. “ooba currently gets approval for 73% of the home loans it facilitates, while the national bank average is 54%, which means that you have a much improved chance of a successful and well-priced home loan if you go through ooba.”