Home loans for Bad Credit in South Africa

Home Loans in South Africa

Planning to buy a home but lack the funds to pay for the property? There are ways to make your purchase more affordable and flexible to suit your financial capacity.

You can look into home loans offered in South Africa. There are banks and lending companies that can help you live in your dream house while you pay for it monthly.

What is a Home Loan?

A home loan is provided by lenders to those who lack enough funding to pay for a property in full. The lender holds the title deed of the property you’re purchasing as a form of security for the loan. The deed title won’t be awarded to you until you’ve fully repaid the loan.

How do Home Loans Work in South Africa?

Banks are the most popular providers of home loans in South Africa. They profit from the varying interest rates borrowers pay for throughout the length of their loan contract. This is why when you’re getting a home loan, consider the amount you want to borrow and the repayment terms presented to you by the lender.

Home loans in SA usually have to be repaid within 20-30 years. This includes the principal plus interest accumulated throughout the whole period. Your home loan interest rate will be based on the rate dictated by the South African Reserve Bank (SARB). Monthly repayments may vary as the interest rates depend on the fluctuation of the prime interest rate.

Typically, you’ll be spending your first years paying off the interest your home loan is accumulating. Your repayments will eventually catch up and you’ll be able to cover the whole loan.

Adding a little extra on your monthly repayments can go a long way. Home loan Interest rates are computed on a daily basis, meaning your loan may increase or decrease in value. The latter is the ideal situation but to be on the safe side, assume that the former will happen more often which means your debt will continue to increase.

It’s best to repay your loan as fast as you can. The little amount you add every repayment decreases your balance, saving you money in the long run.

SA Home Loans Approval

Applying for a Home Loan

The most significant factor lenders look into is your ability to repay the loan. They’ll be comparing the loan amount you’re applying for and the computed monthly repayments you have to accomplish. Your salary should provide enough leeway to repay the loan and pay for your daily necessities at the same time. It’ll be easier to get your home loans pre approval if you have a permanent job where you get your monthly salary.

Aside from your job stability and monthly income, there are other factors lenders consider in approving your SA home loan application. They’ll also take into account your age, credit history, the amount of down payment you can give, and any other debts you’re repaying. It’s a plus to them if you have other income streams that can improve your financial status.

Lenders will not approve your home loan application if the computed monthly repayments will exceed 30% of your individual or joint (if you have a partner) gross income.

If you’re a foreigner who plans to buy a property in South Africa, expect restrictions and special rules to be imposed on your loan request.

In case you fail to repay your SA home loan, you’ll be evicted from your house and your property will be sequestered. It will be categorized as a property in foreclosure and it will be put up for sale at an auction.

The sale is done in an attempt by the lender to recover the remaining balance you owe them. The proceeds of the sale will be used to fill the remaining amount you owe, excluding the legal costs. You’ll be responsible to pay any amount incurred outside of the home loan contract.

There are other expenses you also have to consider in buying a property aside from the loan itself. It’s possible you have to also pay for attorney fees, cost of moving, and transfer duties. Consider these things in preparing to obtain a home loan in South Africa.

Top Home Loan Lenders in South Africa

According to a report from the South African Consumer Satisfaction Index (SACSI), the following banks provide the best home loans in South Africa: