The benefits of paying a deposit

home-loan-deposits-how-muchOf course no-deposit or 100% home loans do make it easier for young buyers and first-timers to get a start in the property market, and since the total withdrawal of such loans in the 2009 recession, they have steadily become more freely available, especially for the purchase of lower-priced properties.

“However, our latest statistics show that the percentage of loans being granted for the full purchase price has actually fallen to 39% now from 41% two years ago, and is still trending downwards,” says Shaun Rademeyer, CEO of BetterBond Home Loans, SA’s leading mortgage origination group.

“This is no doubt a reaction on the part of lenders to the recent contraction in the economy and growing employment uncertainty on the part of consumers – and it underlines the fact that it is always preferable for home buyers to pay a deposit if they possibly can,” he says.

If someone with a new 100% home loan were suddenly to lose their job, for example, and had to sell their home in a hurry, there would be selling costs and agent’s commission to pay as well as the 100% loan to repay, so they could quite easily end up owing more than the sale price of their property.

“The buyer who had paid a 10% or 20% deposit would obviously be able to cope much better in this situation – and it is worth noting that those who put down a deposit are also typically granted their loans at a lower rate of interest, which makes it easier for them to keep up with monthly repayments when times are tough.”

In addition, Rademeyer notes, those who save up a deposit before buying will save a significant amount on the total cost of their home over the loan period.

“For example, a R650 000 home bought with a 100% loan at 10,25% (prime plus 1%) would cost a total of more than R1,53m over 20 years. The same home bought with a deposit of R65 000 and a 90% loan would cost a total of about R1,38m.

“That is a saving of more than R150 000 – a pretty good return on the R65 000 that the homeowner ‘invested’ as a deposit. And it is likely to be even better if the buyer is able to secure a better interest rate by paying a deposit.”

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About BetterLife Home Loans

Since 2003 BetterLife Home Loans has been SA’s No.1 Bond Originator, handling the entire home loan application process on your behalf – free of charge! Our aim is still to source the best interest rate for you by submitting your home loan application to all the major banks. There is no easier way to apply for a Bond or Home Loan in South Africa!

One response to “The benefits of paying a deposit”

  1. r0j0e says :

    amen.. part of the issue in paying a deposit is in the lawyers fees also being so exorbitant.. if the lawyers could charge a flat fee, or even a more visible standardised industry-managed sliding-scale fee, it would work to everybody’s benefit.

    unfortunately the buyer has no say in either the bond registration attorneys (bank decides) or the transfer attorneys (estage agent/seller decides), so neither do we benefit from any possible discount if we were able to choose the same attorneys for the 2 parts of the transaction 😦

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