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Second home finance in South Africa: everything you need to know

Second home finance in South Africa: everything you need to know

Financing a second home in South Africa is different to buying your first. For some, it’s about securing a holiday retreat; for others, it’s an investment that can generate rental income and long-term growth. Whatever your goal, it’s important to understand the complexities before you commit to second home finance in South Africa.

How second home finance in South Africa works

Most buyers rely on a home loan (bond) to fund part of their second property purchase. The process is similar to applying for your first bond, but banks usually apply stricter criteria. They want to be sure you can afford the extra repayments while still covering the costs of your primary residence. In practice, this often means:

  • Higher deposits: While first-time buyers can sometimes secure a 100% bond, second-home buyers are typically expected to put down at least 10 to 20%.
  • Proof of affordability: Banks will look closely at your income, existing debt and monthly expenses. If you’re already stretched, approval can be difficult.
  • Interest rates: Your personal risk profile will determine the rate offered. Buyers with strong credit records may still access competitive rates, but they’re rarely as favourable as those for first homes.

Using equity from your first home

Many South Africans choose to unlock equity in their existing property to help finance a second home. If you’ve been paying off your bond for a number of years, or if your home has increased in value, you may be able to access these funds through:

  • An access bond: Drawing on extra repayments you’ve made over time.
  • Refinancing: Increasing the size of your existing bond to free up cash.
  • Collateral: Using your current property as security for the new bond.

Each option has pros and cons, and it’s best to get professional advice before deciding.

Costs to factor in

Financing a second home isn’t just about the purchase price and bond repayments. There are several other costs to budget for:

  • Transfer duties and legal fees: Unless the property is under the threshold set by government, you’ll pay transfer duties plus attorney fees.
  • Municipal rates and levies: Ongoing monthly charges can add up, particularly for properties in estates or sectional-title developments.
  • Insurance: Homeowners’ cover is essential, and you may also need additional cover if you plan to rent out the property.
  • Maintenance: A second home still needs upkeep, even if you only use it for holidays.

Tax considerations

If you rent out your second home, the income must be declared to SARS. While you can deduct certain costs – like bond interest, rates and maintenance – the rental income could push you into a higher tax bracket. When you sell the property, capital gains tax will also apply. Understanding these implications is key to working out whether the purchase is financially sound.

Popular second-home markets in South Africa

Demand for second homes is strong in areas that combine lifestyle appeal with investment potential. Coastal towns in the Western Cape and KwaZulu-Natal remain popular, while scenic destinations in Mpumalanga and the Eastern Cape are also attracting interest. Buyers living in Gauteng often look to these areas for weekend getaways or retirement planning.

Getting the right finance solution

With banks tightening their criteria for second-home finance, it pays to shop around. Applying through a bond originator like BetterBond can increase your chances of approval, because we will submit your application to multiple banks and negotiate for the best possible rate. This saves you time and helps ensure you don’t miss out on a better offer.

A second home can be both a lifestyle upgrade and a smart investment, but it requires careful planning. Be realistic about affordability, understand the additional costs and consider the tax consequences. Most importantly, explore all your financing options so you can secure a bond that works for your circumstances.

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