Qualifying for a 105% bond on your first home in your 20s or early 30s

Qualifying for a 105% bond on your first home in your 20s or early 30s

Private Property South Africa

If you’re in your twenties or early thirties and your career is taking off, now may be the best time to get onto the property ladder, says Carl Coetzee, CEO of BetterBond.

“Affordability is often cited as a reason why millenials - people between the ages of 26 and 41 - are reluctant to invest in property. However, South Africa’s main banks offer a range of loan products that include bonds of as much as 110% for young professionals younger than 35 years of age, so affordability need not be an obstacle.” A loan of 100% or more makes it possible to buy a home without having a deposit. It could also cover the transfer and bond registration fees that need to be paid upfront, explains Coetzee.

Lightstone reports that more than 300 000 millennials bought homes between 2015 and 2017, of which a third were first-time buyers. “This segment is therefore an important driver of housing activity,” says Coetzee, “and it’s encouraging to see that banks are offering maximum loans to these buyers.” He adds that lending criteria varies slightly from one bank to the next, but generally buyers under the age of 35 who are buying a home of not more than R1.8 million could qualify for a loan of between 105% to 110%,” says Coetzee.

WATCH : Understanding the bond registration process

Currently, BetterBond’s average approved bond size for first-time buyers is just over R1 million, with the average purchase price at close to R1.2 million. The bond and transfer costs on a R1.2 million bond at the current prime lending rate of 7.75% is R66 572. “Securing a 105% bond would cover these upfront costs, making it possible for a young professional to afford their preferred home,” says Coetzee.

According to BetterBond’s application data for February, the average 31- to 40-year-old bond applicant is earning just over R42 500 a month or half a million rand a year, up 4.5% from the 12-month period ending in February 2021. Meanwhile Gen Z and millennial buyers between the ages of 20 and 30 are earning an average of R30 600 a month. “This places all of these applicants well within the annual earnings cap of R1.5 million a year set by some of the banks,” says Coetzee.

There has been a shift in buyer patterns since the pandemic, with more people opting to invest in properties that offer a better quality of life. This trend is evident among millennials too, so it’s important that they are able to access financial products that make this possible,” says Coetzee. “BetterBond’s average home purchase price of applicants earning between R35 000 and R45 000 a month has increased by a noticeable 12% year-on-year (February 2022) to R1.4 million.”

Coetzee adds that buyers making use of these 100%+ loans should note that a loan offering greater than 100% will push up their monthly bond repayments as the deposit, transfer costs and bond registration fees are all included. “By using BetterBond’s online calculators it’s possible to factor these costs into the budget calculations to ensure that the higher monthly bond repayments are affordable.”

Writer : Irvine Partners


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