All four South African banks offer home loans with both fixed rate and variable interest options that can be paid back over a given period of time, from five to 30 years. They also all have a range of options, and most will finance vacant land, homes and also building projects, within their own set of rules. Here is a smattering of information about the four of them.

Absa home loans

Absa Bank caters for individual people and couples who earn either above or below R15 000. They are willing to finance 100% loans for smaller loans, and will tailor-make home loans for their own existing clients. Absa also has a home loan package for people who want to buy and then rent out the property.

First National Bank loans

Like Absa, FNB has options for both individuals and couples who earn up to R15 000 or more than R15 000. FNB has also created specialised packages for both foreigners wanting to invest in domestic property in South Africa, and Muslims who are bound by the Islamic faith that does not allow any form of money interest. FNB’s IslamicFinance package isn’t limited to those of the Muslim faith, but it is only available for bonds in excess of R240 000.

Nedbank home loans

While Nedbank will finance both vacant land as well as houses, they appeal to the higher end of the market, and they don’t offer specific deals for first time home buyers or those people who earn a small monthly income. Like Absa, Nedbank has a specific home loan for those who want to buy and then rent the property out. Clearly aiming at people who aspire to being successful, Nedbank does have a different type of home loan – and this allows borrowers to apply for an amount which is more than the value of the property that they are buying. This additional money is not paid out when the bond is registered, but it is available later, when the property is worth more or when the borrower is able to afford a larger repayment figure.

Standard Bank home loans

Standard Bank caters for the lowest income bracket, offering DreamStart home loans to entry-level home buyers who earn between just R1 500 and R6 000 a month. Standard also has home loans available for first time buyers who earn at least R6 000 both jointly (husband and wife) or on their own. Their standard (or ordinary) home loans are offered to anyone in permanent employment who earns more than R6 000. It will be up to you to decide whether this bank offers the best home loan or whether you will find it at another financial institution.

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Home loans for first time buyers

Loans for first time buyers are available to couples and individuals who earn at least R6 000.00 a month and who have never had a home loan before. Currently these loans are available for 100% plus costs totally up to 4%. Loan holders are obliged to pay via debit order. The usual repayment period at this time is 20 years, which also applies to the other home loan types.

The DreamStart home loan

Another immensely popular home loan package from Standard Bank is their DreamStart home loan that aims to make it easier for what they term “entry level” income earners to get into the property market. Borrowers need to be earning between R1 500.00 and R6 000.00 a month excluding any additional subsidies or allowances. This can be the figure earned between husband and wife, which gives an enormous number of people the opportunity to own a home of their own. Like the first-time buyers loan, the DreamStart home loan must be paid monthly by debit order.

Standard home loan option

This bank’s ordinary (or standard) loan opportunities are applicable to individuals or couples who earn more than R6 000.00 and are permanently employed. The amount of the instalment required to repay the loan cannot be more than 30% of earnings. Instalments must be paid by debit order or with a salary deduction paid by the employer monthly. Unlike loans available to lower income earners, ordinary home loans are never more than 95% of the purchase price, and they cannot include any registration or transfer costs. This means that people taking out these loans need to have some ready cash to pay a deposit as well as all the costs.

AccessBonds

Standard Bank also offers an AccessBond facility that enables people with home loans to deposit money into their home loan account and also transfer money out of the account into other linked Standard Bank accounts. This increases the flexibility of a home loan, for example by reducing the interest payable on the loan if you pay extra into the account. There are however limits relating to both deposits and transfers that may be made to and from a home loan account.

The Standard Bank Pledge

Standard Bank offers what it calls a “pledge” that indicates an amount they are likely to qualify for if you apply for a home loan. This enables prospective property buyers to apply for the chance to get a home loan, and then, depending on what the bank pledges, shop around for property in the relevant price range. This is not a thumb suck arrangement though because you will be required to supply income and other details when you apply for the pledge, so that the bank can make an educated estimate of what you are likely to be able to afford. Standard Bank pledges are valid for three months and need to be verified and approved once you have found a suitable property. The bank will also do an assessment of the property before agreeing to any of their Standard Bank home loans.

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Traditional home loans

Individuals earning at least R15 000 a month qualify for FNB’s traditional home loan packages, providing they have a clear credit record. In addition, “joint applicants” (which include married couples) and other legal entities (trusts, close corporations and so on) also qualify. Loans may only be used to buy a residential property and applicants must be between 18 and 55 years. FNB requires applicants to produce proof of income or, if self employed, six months’ bank statements, as well as proof of residence, an identity document, marriage certificate and a copy of an offer to purchase, if there is one.

Smart Bond home loans

The Smart Bond home loan option is for South African residents who earn less than R15 000 a month. It provides purchasers with 100% of the money needed to buy a home, which means that they don’t have to put down any form of deposit. The minimum loan amount is R20 000 and the repayment period is five to 20 years. Instalments have to be paid either by a debit order or directly by their employer (using a payroll deduction facility). First time home buyers get a home-ownership education programme supplied absolutely free. However this type of home loan carries an initiation fee of R3 990 (including VAT) that has to be paid when the loan is taken out. They also charge a R39.90 monthly administration fee. Applicants are required to supply their latest pay clip or salary advice or a 12 months’ bank statement if they are self employed. Obviously ID and details of the property are also required.

Home loans for foreigners

FNB has a home loan option it calls Foreign Choice that is designed for foreigners and South Africans now living abroad. The bank will finance up to 50% of the purchase price of a home in South Africa; the balance must be provided in form of “foreign funds”. This means that purchasers will need to submit an Exchange Control application with the relevant South African authorities.

The Foreign Choice home loan option, like traditional home loans, is available to joint applicants and to individuals earning at least R15 000 a month. In addition to the usual fees connected with home loans, FNB requires a R650 non-resident fee and a reason from the foreign purchaser for buying property in South Africa. For example some people buy homes as an investment, to rent out, while others buy them to use as a holiday home. Individuals applying for the Foreign Choice home loan are required to supply an up-to-date statement of their assets and liabilities together with a banker’s report from the country where they are living.

IslamicFinance home loans

FNB’s IslamicFinance homes loans cater specifically for those of the Muslim faith who are governed by Islam’s prohibition of the use of Ribe (or interest), which is of course normally part and parcel of any home loan agreement. The main difference between this type of home loan and the others is that there is an agency agreement (or Wakalah) contract through which all charges and fees are levied. There are also several exclusions, and no further loans, re-advances, building loans or the flexi facility are permission. Only First National Bank home loans above R240 000 are available from IslamicFinance, but there is an option to repay the loan over five, seven, ten or 20 years. A deposit is compulsory, and instalments are fixed for the full period of the loan and must be paid by debit order. The IslamicFinance home loan is not limited to the Muslim community, and all customers (who should be KYC – know-your-customer – compliant) are subject to the usual bank lending criteria.

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Ordinary Nedbank home loans

Nedbank’s “ordinary” home loan package is available for the purchase of houses and for vacant land. Repayment terms extend to as long as 30 years and there are both fixed and variable interest rate options.

The bank is willing to finance property belonging to existing and new clients, but requires substantial documentation with the application, as do all the other banks. These include a copy of ID documents (which is standard), and a copy of the offer to purchase (unless the property to be finance is already in the name of the person applying for the loan). The bank also needs income and expenditure and assets and liabilities statements, a copy of the past three months’ personal bank statements, and if the person applying is employed, either their most recent salary slip or a letter from their employer that confirms how much he or she earns. Self employed applicants have to supply bank statements from the previous six months, unless they are already Nedbank clients. If the property is to be purchased by a trust, company or CC, additional documentation is required.

HomeVision home loans

The Nedbank HomeVision option is an interesting one because it allows home buyers to register bonds that are higher than what is needed to buy the property. While the extra money is not released immediately, it is made available when the value of the property increases and when the buyer can afford the repayments.

Nedbank’s idea is that the extra funds can be used at a later date for renovating the house, for home improvements (for example to build a swimming pool), to pay for school or college fees, or even to go on a long-awaited holiday. It’s a clever and cost effective way of ensuring there will be money available later, without you having to register a second bond. Requirements in terms of paperwork are the same as for an ordinary home loan, as are interest rate options and repayment terms.

Nedbank Buy to Let Loan

Property is generally regarded as an excellent investment which is why many people buy houses and then rent them out to those who cannot afford to buy. Nedbank recognises that buyers who purchase with the specific intention of renting out the house have different needs to those who buy so that they have a home to live in. They also recognise that this decision is specifically motivated by a wish to “accumulate wealth” by investing in residential property. Since this option has been identified as an investment – unlike other Nedbank home loans – purchasers must either make a lump-sum deposit, otherwise they must invest a pre-determined amount of money monthly. The third option is to combine the two and put down less but also “invest” monthly.

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Absa Home Loan

The standard-type home loan from Absa is described as a “flexible home loan” that may be used to finance residential properties and vacant land. There are various options available to home buyers, including a choice between a variable interest rate and fixed interest over the period of the loan. Similarly, buyers may choose between repaying the loan over an extended period of time (as long as 30 years if they wish) or paying it off as quickly as possible, using the FastForward home loan option. Both options have their advantages, depending on the circumstances of the buyer.

Those people with Absa home loans also have the advantage of accessing money that has been paid into the loan at a future date. Products include Absa’s FlexiReserve (which gives access to prepaid or advance funds that have been paid), FurtherAdvance (for those who want to finance other purchases or debts using the lower home loan rate of interest), Readvance (which provides access to the difference between the loan granted and the outstanding balance of the loan), and MultiPlan (which enables home loan customers to split their loan into separate accounts, some with a variable interest rate and some with a fixed rate). Generally to be able to access money from your bond account you will need to pay higher monthly repayments to increase the equity in the home loan. This idea is promoted by Absa as a kind of savings plan that saves extra money because deposits are deducted from the outstanding loan balance, which reduces the interest without attracting tax, which interest on a savings account might do.

MyHome Home Loan

This home loan option has been tailored for South African home buyers who regularly earn R15 000 or less every month, singly or jointly. The bank will look at financing 100% of the loan – which means borrowers do not necessarily need to put down a deposit. They are also often willing to make an additional 10% available for transfer and registration costs. The MyHome home loan is available over any term of repayment, up to 30 years, and there is a range of fixed rates available. This means that the repayments remain the same throughout the repayment period of the loan.

Buy-to-Let Home Loan

Absa also offers a customised Buy-to-Let home loan package which allows the rental income to be used to service all or a portion of the repayments.

Home loans for existing customers

Absa will tailor-make a competitive home loan agreement for its valued customers. Consultants will help customers calculate home much they can afford and then discuss the benefits of the different options, whether they earn R15 000 a month or R150 000 a month, because they prefer their customers to take out Absa Bank Home Loans. The bank also has financing options for those wanting to build or refinance properties.

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