Preparing to buy a home


In a hurry to buy? A smaller deposit could mean smaller savings in the long-term

In a hurry to buy? A smaller deposit could mean smaller savings in the long-term

Is there any point in waiting to save up a large deposit on a home when interest rates start declining, and the banks are in a hurry to grant more home loans?

Many buyers feel they should take advantage of lenient lending conditions and secure a home loan with whatever deposit they have. There's a perception that waiting to save more could mean the risk of stricter lending conditions, higher home prices, or escalating interest rates.

But that urgency could be the undoing of over-hasty homebuyers. In our experience, the best choice, if you're in a hurry to become a homeowner, is to use whatever cash you have saved up to pay a bigger percentage deposit on a less expensive property – not a smaller percentage deposit on a higher-priced property.

The advantages?

  • You'll need a smaller home loan
  • Your minimum monthly bond repayment will be lower, and you'll need less disposable income to cover it
  • The monthly household income you need to qualify for the loan will thus also be lower
  • You may even be able to pay an additional amount off your bond each month and pay your home off that much earlier!
  • You'll have a better chance of qualifying for an interest rate concession on your bond, which could save you thousands of rands on the total cost of your home over 20 years

On a R1 million home loan, an interest rate concession of just 0.5% will reduce the total cost of your home over 20 years by almost R80 000. And if you're then able to put in an additional R500 a month, you'll pay off your home in just over 17 years, instead of 20 - and save a further R195 000 in the process!

Whether you're buying in haste or at leisure, it's always a good idea to use a reputable bond originator like BetterBond. You'll improve your chances of approval, and, with banks competing to offer you the best deal, you'll be enjoying those savings at leisure.

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