How to finance a property purchase on an estate

Private Property South Africa
Private Property Reporter

Lephoi Mokgatle, the head of Home Loans Digital at Nedbank, chats to the Afternoon Express team about how to finance property on an estate.

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Presenter: Welcome back to Win a Home on Afternoon Express exclusively on SABC3. Private Property has stuck to its promise of providing us with advice on the different aspects of property on estate. Joining us in the loft today is Lephoi Mokgatle. She's head of home loans digital at Nedbank, and she is going to chat to us about how to finance property on an estate. Welcome to our loft.

Lephoi Mokgatle: Thanks for having me.

Presenter: So let's first start with why estates are becoming so popular. Are you guys seeing, on your home loan digital platforms, are people applying for loans to move on to estates?

Lephoi Mokgatle: I would say yes. We've seen far more home loan applications for development loans, which is your residential estate living loans, and your vacant lands, as well as your building loans. I think it's also because of the accessibility and the convenience of it all. A lot of these home loan applications are coming from your first-time home buyers, but mostly couples. So people who are starting a family or whose family's getting a bit bigger. They're moving into that estate living purely to have access to certain schools that are in the estate. And, of course, I mean, the convenience of having your gym and a restaurant and the spa all in one space just makes it absolutely ideal.

Presenter: So there's a lot for us to understand there. I mean, there are three different ways that one can buy on estates and [one must?] get them loaned for. Am I understanding that correctly?

Lephoi Mokgatle: Yes. You're correct. So, essentially, there are three different ways. The first is to get a vacant land bond. So that is just to acquire the land where there's no building on it, and then perhaps build at a later stage.

Presenter: Because you can get a tent if you're really poor and you can-- like me, I can buy the land but I can't buy the home, so I'm just going to build a tent. Done.

Lephoi Mokgatle: Absolutely. Absolutely. And then the second option is to get the land as well as a building package at the same time. So that's what we often term as a building loan. And it comes almost like a plot and plan, as well. I'll tell a little bit about that later. And then the last way is if there is an already existing property that you have your eye on in a particular estate, then you'd just buy it as a normal home loan.

Presenter: Okay. Amazing. And then what about sectional title? Because, I mean, a lot of people are trying to buy into sectional titles. They like the sort of affordability of it all. They understand it as a sort of plug-and-play kind of system that they like. Is there a different way to finance those?

Lephoi Mokgatle: That's actually a very good question. So sectional titles are really accessible, you're right. And particularly in places like Gauteng and the Western Cape where you've got urban areas like Capetown and Johannesburg, it's quite ideal for clients who want to apply. Sectional titles, there isn't really a different way of applying for a home loan for a sectional title, but just be aware of the fact that it's part of your shared use. So you don't just buy the building on its own, you're buying the opportunity to actually share in some of the--

Presenter: I see-- amenities that are around it, I guess.

Lephoi Mokgatle: That's right. Yes.

Presenter: So the idea behind buying into sectional title is that you avoid the transfer duty?

Lephoi Mokgatle: No. Not necessarily. So if you're buying a fully completed building or unit within a sectional title and you're buying it from an existing seller, then transfer duties will apply. However, if you are buying it directly from the developer, then there will be no transfer duties.

Presenter: So find these deals soon while these developers are building those new plots. Buy in early so that all these sort of duties get avoided and you can save yourself a bit of money.

Lephoi Mokgatle: Absolutely. And the developers have really great packages that they can offer to customers. And the banks can actually facilitate that as well.

Presenter: Stunning. Now you mentioned you want to expand a bit more on building and on those kinds of loans. Because that's a very specialized way of loaning from a bank to build. How does that work?

Lephoi Mokgatle: So building loans work slightly differently to your normal home loan in the sense that the bank does not pay out the money at once upon registration. So what usually happens is you'll come to us as a bank and say, "I'd like to apply for a home loan, but I want to build on it, so I don't have a complete building yet." And the bank will say, "Yes, you're good for it." And then once the bond registers, they will start making what we call progress payments. And they pay out as and when the building gets completed. So, for example, your builder will have started the foundations, for example. And then the bank will issue a first drawdown of those payments. And then when the builder get to, for example, window level, then another progress payment goes out up until that building is completely finished, and you, as the client, are happy with it.

Presenter: Okay. Let's just quickly ask you something that's slightly off the books a little bit. But when you're trying to buy in an estate, do banks look into where you're trying to build this property or buy this property as a way of affording a bond to build? Or is it purely just about the person that's going to be paying it off?

Lephoi Mokgatle: So we look largely at the individual. So what your previous credit behavior was like, how you pay your debts, how you service your income versus your expenses. But we do also look at the area in which you want to buy property. So we'll look at things like is it close to certain schools or parks? Is there a functioning sewage system? Which would surprise you a lot of the times. Sometimes, there isn't [laughter]. So those are some of the things that we look at, yes. Presenter: Okay. So buying in the right kinds of estates could also help you in that process, too, which is awesome.

Lephoi Mokgatle: Absolutely. Yes. The bank has very good relationships with a lot of the developers. So they would do due diligence with the various developers and make sure the development caters for suitable lending.

Presenter: Amazing. Thank you. As a new time and a sort of young person trying to enter into that buying of the property market, I've learned a lot from you today. So thank you very much.

Lephoi Mokgatle: It's my pleasure.

Presenter: Well, there you have it, the lowdown on how to finance your dream property on an estate. The other option is, of course, to win your dream home. No finance needed. And you can only do that if you enter the Win a Home Grand Prize Competition on the Private Property website, in which you stand a chance to win one of the multi-million rand homes currently being finished by the design duos on the Eye of Africa Estate.

All you have to do is log on to click on that Win a Home logo, and answer a very easy question. Now it's time for us to take a quick break. When we return, it's time for those duos to stop lounging about.

Click here to enter the Win a Home competition


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