The ins and outs of 100% bonds

The widely shared mantra of "save up a deposit before you buy property" is good advice, but for some families, it's just not possible. And while you're not able to save up a deposit, you also don't want to continue being a tenant and ultimately paying off someone else's home loan instead of your own. The good news for you, if you're in this scenario, is that it is possible (under certain circumstances) to get a 100% home loan - or even one slightly higher. Jawitz Properties gives you the lowdown on 100% home loans.

How to apply for a 100% home loan - and why you should use a bond originator

The application process for a 100% home loan is exactly the same as for any other home loan. You will apply to the banks, and the smart way to do this is to use a bond originator such as ooba, Doing this means that your application will be put forward to all the banks - but you'll only have to fill in one set of paperwork.

Here's an even bigger advantage of using a bond originator: it will give you the highest possible chance of being granted a 100% home loan. Your application will be submitted to all South Africa's major banks, meaning that if one bank turns your application down, you've got several other chances. Since the banks' appetites for risk change all the time, one bank may be more willing to grant you your loan. Over and above this, you get to take advantage of competition between the banks to increase your chances of getting your loan approved and getting the keys to your very own home.

How will the banks decide whether to grant me a 100% home loan?

The most important factor that the banks will take into consideration is whether they think you can afford to pay back this loan. For example, if your gross household income is R60 000 per month, you will not be able to service your debt if you buy a property for R10 000 000. However, if you're looking to buy a property for R1 500 000, the banks are likely to consider this a calculated risk.

Another factor that the banks will pay close attention to is your credit rating. This score is based on various factors including how well you have managed debt in the past and how much other debt you have. You can check your credit score for free online, and the result will be a three-digit number. Nedbank has an easy-to-use and quick tool that gives you your credit rating in just a couple of minutes - and you don't have to be a Nedbank customer to use it.

How much will a 100% home loan cost me?

The downside of 100% home loans is that because you're borrowing more, your monthly payments will be higher. The good news is that thanks to some useful online calculators, you can work out exactly what your monthly repayments will be so that you can budget accordingly. For example, the calculator will show you that if you want to take a 100% bond on a property that you're buying for R2 000 000, then your monthly repayment will be R21 674.14, assuming an interest rate of 11.75%.

What is a 105% loan?

When you buy a property, there are expenses over and above the cost of your new home. A 105% home loan gives you a little bit more than you need to cover the cost of your home, so that you can also take care of transfer and bond registration fees. You have the best chance of being granted a 105% home loan if you are a first-time buyer and you're buying a property for less than R1 800 000.

Getting onto the property ladder can be a unnerving process, but the Jawitz Properties team is here to guide you every step of the way, from finding and financing the right home right up to the day you move in. Contact us for more information.