Denise Simpson discusses the rules that apply to non-residents and South Africans living abroad who wish to qualify for a home loan
The Reserve Bank ruling, and not the Commercial Bank ruling, for mortgage
lending for non-residents is that they can buy and mortgage property in South
Africa, but the 50% risk rule will apply. Non-residents will have to fund 50% of
the value of the property and pay for all costs that will be incurred i.e. bank
costs, transfer costs and attorney costs (normally about 8% of the property
value); the other 50% will be funded via a mortgage bond from the bank of their
choice and normal lending criteria will apply i.e. affordability, credibility
and the property offers good security.
South Africans working and living out of South Africa
There has been an increased demand for South Africans living overseas to
purchase property back home.
The Banks will lend to these individuals, but they will not lend more than 80%
of the value of the property. The reasoning behind this is that there is a
concern that when they return they will not necessarily be earning the same
income and be able to afford the home loan repayment. Once again the normal
lending criteria will still apply.
The Banks will have to be very certain of the following:
Employers contact details to confirm employment
Proof of income
6 months bank statements of where salary is credited
Property being bonded offers good security
The Banks are flexible, but the client's profile and earnings will determine
their decision. For example, a higher risk loan will be considered in the case
of a high income earner, who with all expenses taken off, still has a low ratio
of gross income to net income.
This varies from bank to bank, but the 80% rule is the norm.