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

Article insights:

A larger home loan deposit on a lower-priced property can reduce monthly bond repayments and improve long-term savings.
Buying a more affordable home may increase your chances of qualifying for a home loan and securing a lower interest rate.
Even a small interest rate concession on a bond can save homeowners thousands of rands over the loan term.
Paying extra into your bond each month can shorten your repayment period and significantly reduce total interest costs.
Using a reputable bond originator can help homebuyers compare bank offers, improve approval chances, and secure better home loan interest rates.

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 in a hurry to buy or you have time on your hands, 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 interest rate, you'll be enjoying those savings at leisure.

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