Getting a Bond as a First Time Buyer
Applying for a bond can be a complicated and scary process, particularly for a first time buyer.
Applying for a bond can be a complicated and scary process, particularly for a first time buyer. Many potential buyers are unware that, while having a deposit is preferable, it is possible to get a 100% loan depending on your individual circumstances. In fact, it is sometimes possible for first time buyers to get a 108% bond , thus covering the transfer and bond registration costs, although this can be difficult to secure. You also then pay interest on that full amount so in the long run you are better off taking as small a bond as possible.
While you can of course apply directly to your bank, it is often helpful to use a reputable bond originator who will negotiate with various banks for you. This saves you time and effort as you only have to fill out forms and provide documents once and the rest is done for you. Bond originators are also experts at what they do, and may well be able to negotiate a better deal than you may have for yourself. Best of all, their services are free as they are paid by the banks when they have successfully secured you a bond.
You will significantly improve your chances of getting a great deal if you have a deposit and have an excellent credit history. Remember, the banks make a profit out of lending you money so they’re keen to do so, but they also have to limit their risk. By showing that you are willing to invest some of your own money in the form of a deposit, that you have a history of always paying back your debt and that you can clearly afford the property based on your monthly income and fixed expenses, the bank will be assured that you are a safe bet and be willing to give you a good deal.
You are allowed to have one free credit check per year so it is advisable that you take advantage of this and find out what your score is. If it is quite low, it may be worth trying to increase it before applying for a loan as it will significantly decrease your chances of getting a bond. It is possible to check this online, or alternatively your bond originator would be able to assist.
Be aware of the interest rate you are offered. This is calculated based on the current prime interest rate. Obviously this rate makes a significant difference to our monthly repayments so it’s worth trying to negotiate a good deal. This is where having a deposit can be helpful.
When calculating the costs involved, make sure you’ve included everything, not just the deposit. If your property costs more than R900 000 there will be transfer costs, and you also need to pay bond registration fees. Ooba has a very useful cost calculator on their website. For example, on a freehold property bought for R950 000 with a R50 000 deposit, your bond registration fees will be approximately R24 000 and your transfer fees around R21 000, making it a total of around R 45 000. Bear in mind this is just an estimation but it at least gives you a fair idea of what to expect.
Getting your first bond approved takes time and effort so be sure you know all the facts beforehand and get the help you need. It will all be worth it when you get to move into your very own home!
Writing blogs about the property market of South Africa.
Content Team - Real Estate Agent
